InnovAge Holding Corp.

Previous wording

InnovAge Holding Corp. (“InnovAge”) became a public company in March 2021. As of December 31, 2024, the Company served approximately 7,480 PACE participants, and operated 20 PACE centers across California, Colorado, Florida, New Mexico, Pennsylvania, and Virginia.

Current wording

InnovAge Holding Corp. (“InnovAge”) became a public company in March 2021. As of March 31, 2025, the Company served approximately 7,530 PACE participants, and operated 20 PACE centers across California, Colorado, Florida, New Mexico, Pennsylvania, and Virginia.

Previous wording

Census and capitation revenue. We experienced, and continue to experience, delays and increased gaps in eligibility both for new enrollments and Medicaid redetermination applications during fiscal years 2024 and 2025 as a result of processing delays and other enrollment and redetermination procedures that vary by State and county. Specifically, in the State of California, processing delays have resulted in our inability to collect a portion of accounts receivables from the State leading to higher allowances against accounts receivable and corresponding write-offs. We are working to increase the proportion of new enrollments submitted prior to the first enrollment deadline each month to minimize enrollment efforts required by the State. We expect to continue mitigating measures during the remainder of fiscal year 2025, which include utilizing State approved third-party eligibility partners to expedite applications and escalating delayed cases to State administrators. During fiscal year 2024 and the first two quarters of fiscal year 2025, these delays and eligibility gaps have not had a material effect on the Company's financial statements or operations. We will continue to assess the situation as it evolves.

Current wording

Census and capitation revenue. We experienced, and continue to experience, delays and increased gaps in eligibility both for new enrollments and Medicaid redetermination applications during fiscal years 2024 and 2025 due to processing delays and other enrollment and redetermination procedures that vary by State and county. Specifically, in the State of California, processing delays have resulted in lower estimated per member, per month ("PMPM") amounts which triggered a negative adjustment for prior PMPM estimates and is also expected to reduce the reimbursements we receive from the State. As a result, during the third quarter of fiscal 2025, we increased the proportion of new enrollments submitted prior to the first enrollment deadline each month to minimize enrollment processing efforts by the State of California. We expect to continue these mitigating measures during the remainder of fiscal year 2025, as well as broadly utilizing State approved third-party eligibility partners to expedite applications and escalate delayed cases to State administrators. During fiscal year 2024 and the first three quarters of fiscal year 2025, these delays and eligibility gaps have not had a material effect on the Company's financial statements or operations. We will continue to assess the situation as it evolves.

Previous wording

In addition, an aging population combined with a shortage of clinicians, creates pressures and increased demand on the limited number of residential facilities. There is uncertainty regarding the access of our participants to residential facilities.

Current wording

In addition, an aging population combined with a shortage of clinicians, creates pressures and increased demand on the limited number of residential facilities. There is uncertainty regarding the access of our participants to residential facilities. The high demand for such facilities may lead such facilities prioritizing patients who are private payors to avoid the frequently changing Medicare and Medicaid program reimbursement rates and rules, annual caps and regulatory requirements.

Previous wording

Additionally, as a result of the adoption of California Senate Bill No. 525 ("SB 525"), which raises minimum wage for many California healthcare workers and will impact many of our contractors and other third-party providers, combined with other macroeconomic factors, our California centers have received provider requests to increase rates to cover their increased labor costs. As a result of competition generated by SB 525 and other California market conditions, we have received rate increases from third party vendors, including home health and care partner services, increasing our cost of care in California. We also increased our wages for impacted healthcare workers and other comparable market positions in the California market. These increases did not have a material impact on our cost of care or labor costs, financial statements or operations for fiscal year 2024 or the three and six months ended December 31, 2024. We will continue to evaluate the impact of this and other similar future legislation on our business. For additional information on the various risks posed by macroeconomic events, regulation, and employee matters, please see the section entitled “Risk Factors” included in Part I, Item 1A of our 2024 10-K.

Current wording

Additionally, as a result of the adoption of California Senate Bill No. 525 ("SB 525"), which raised minimum wage for many California healthcare workers and impacted many of our contractors and other third-party providers, combined with other macroeconomic factors, our California centers have received provider requests to increase rates to cover their increased labor costs. As a result of competition generated by SB 525 and other California market conditions, we have received rate increases from third party vendors, including home health and care partner services, increasing our cost of care in California. We also increased our wages for impacted healthcare workers and other comparable market positions in the California market. These increases did not have a material impact on our cost of care or labor costs, financial statements or operations for fiscal year 2024 or the three and nine months ended March 31, 2025. We will continue to evaluate the impact of this and other similar future legislation on our business.

Previous wording

•Our participants. We focus on providing all-inclusive care to frail, high-cost, dual-eligible seniors. We directly contract with government payors, such as Medicare and Medicaid, through PACE and receive a capitated risk-adjusted payment to manage the totality of a participant’s medical care across all settings. InnovAge manages participants that are, on average, more complex and medically fragile than other Medicare-eligible patients, including those in Medicare Advantage (“MA”) programs. As a result, we receive larger payments for our participants compared to MA participants. This is driven by two factors: (i) we believe we manage a higher acuity population, with an average risk adjustment factor (“RAF”) score of 2.45 based on InnovAge data as of December 31, 2024; and (ii) we have Medicaid spend in addition to Medicare. Our participants are managed on a capitated, or at-risk basis, where InnovAge is financially responsible for all participant medical costs. Our comprehensive care model and globally capitated payments are designed to cover participants from enrollment until the end of life, including coverage for participants requiring hospice and palliative care. For dual-eligible participants, we receive per member, per month (“PMPM”) payments directly from Medicare and Medicaid, which provides recurring revenue streams and significant visibility into our revenue. The Medicare portion of our capitated payment is risk-based on the underlying medical conditions and frailty of each participant. We continue to strengthen our expanding payer capabilities so that our revenue more accurately reflects the acuity of the populations we serve.

Current wording

•Our participants. We focus on providing all-inclusive care to frail, high-cost, dual-eligible seniors. We directly contract with government payors, such as Medicare and Medicaid, through PACE and receive a capitated risk-adjusted payment to manage the totality of a participant’s medical care across all settings. InnovAge manages participants that are, on average, more complex and medically fragile than other Medicare-eligible patients, including those in Medicare Advantage (“MA”) programs. As a result, we receive larger payments for our participants compared to MA participants. This is driven by two factors: (i) we believe we manage a higher acuity population, with an average risk adjustment factor (“RAF”) score of 2.46 based on InnovAge data as of March 31, 2025; and (ii) we have Medicaid spend in addition to Medicare. Our participants are managed on a capitated, or at-risk basis, where InnovAge is financially responsible for all participant medical costs. Our comprehensive care model and globally capitated payments are designed to cover participants from enrollment until the end of life, including coverage for participants requiring hospice and palliative care. For dual-eligible participants, we receive PMPM payments directly from Medicare and Medicaid, which provides recurring revenue streams and significant visibility into our revenue. The Medicare portion of our capitated payment is risk-based on the underlying medical conditions and frailty of each participant. We continue to strengthen our expanding payer capabilities so that our revenue more accurately reflects the acuity of the populations we serve.

Previous wording

•Effectively managing the cost of care for our participants. We receive capitated payments to manage the totality of a participant’s medical care across all settings. The risk pool of our population is highly acute. Together with the factors disclosed above (increased salaries, wages and benefits,annual increases in assisted living and nursing facility unit cost and general medical inflation) our external provider costs and cost of care, excluding depreciation and amortization, represented approximately 83% of our revenue in the six months ended December 31, 2024.

Current wording

•Effectively managing the cost of care for our participants. We receive capitated payments to manage the totality of a participant’s medical care across all settings. The risk pool of our population is highly acute. Together with the factors disclosed above (increased salaries, wages and benefits,annual increases in assisted living and nursing facility unit cost and general medical inflation) our external provider costs and cost of care, excluding depreciation and amortization, represented approximately 82% of our revenue in the nine months ended March 31, 2025.

Previous wording

•Center-level Contribution Margin. The Company's management uses Center-level Contribution Margin as the measure for assessing performance of its operating segments. As we serve more participants in existing centers, we expect to leverage our fixed cost base at those centers and increase the value of a center to our business increases over time.

Current wording

•Center-level Contribution Margin. The Company's management uses Center-level Contribution Margin as the measure for assessing performance of its operating segments. As we serve more participants in existing centers, we expect to leverage our fixed cost base at those centers and increase the value of a center to our business over time.

Previous wording

•Execute tuck-in acquisitions and partnerships. Since fiscal year 2019, we have acquired and integrated four PACE organizations for a total of eight operational centers (excluding the PACE center in Bakersfield, California, which is not yet operational). These acquisitions represent expansion of our InnovAge Platform into one new state and five new markets. By bringing acquired organizations under the InnovAge Platform, we hope to further realize revenue growth and improve operational efficiency and care delivery post-integration. We also have pursued and intend to continue pursuing additional relationships with key stakeholders, existing organizations and other care providers in order to form partnerships in target geography, such as the joint venture we entered into at our Orlando PACE center with Orlando Health during the fourth quarter of fiscal year 2024. On January 2, 2025, with the goal of supporting our growth and improving pharmacy cost-management, we completed the acquisition of certain pharmacy assets from Tabula Rasa HealthCare Group, Inc. (“TRHC”), a leading pharmacy care management company, for a total purchase price of $4.8 million. TRHC will provide management services to the pharmacy business pursuant to a Management Services Agreement with an initial term of five years.

Current wording

•Execute tuck-in acquisitions and partnerships. Since fiscal year 2019, we have acquired and integrated four PACE organizations for a total of eight operational centers (excluding the PACE center in Bakersfield, California, which is not yet operational). These acquisitions represent expansion of our InnovAge Platform into one new state and five new markets. By bringing acquired organizations under the InnovAge Platform, we hope to further realize revenue growth and improve operational efficiency and care delivery post-integration. We also have pursued and intend to continue pursuing additional relationships with key stakeholders, existing organizations and other care providers in order to form partnerships in target geographies, such as the joint venture we entered into with respect to our Orlando PACE center with Orlando Health during the fourth quarter of fiscal year 2024. On January 2, 2025, with the goal of supporting our growth and improving pharmacy cost-management, we completed the acquisition of certain pharmacy assets from Tabula Rasa HealthCare Group, Inc. (“TRHC”), a leading pharmacy care management company, for a total purchase price of $4.8 million. Pursuant to a Management Services Agreement, TRHC provides management services to our acquired pharmacy business with an initial term of five years.

Previous wording

•Contracting with government payors. Our economic model relies on our capitated arrangements with government payors, namely Medicare and Medicaid. We view the government not only as a payor but also as a key partner in our efforts to expand into new geographies and access more participants in our existing markets. Maintaining, supporting and growing these relationships in existing markets as well as new geographies, is critical to our long-term success.

Current wording

•Contracting with government payors. Our economic model relies on our capitated arrangements with government payors, namely Medicare and Medicaid. We view the government not only as a payor but also as a key partner in our efforts to expand into new geographies and access more participants in our existing markets. Any reduction in the budgetary appropriation for our services from government payors, whether as a result of fiscal constraints due to recession or changes in policy could result in a reduction in our capitated fee payment. As a result, maintaining, supporting and growing these relationships in existing markets as well as new geographies, is critical to our long-term success.

Previous wording

•Seasonality of our business. Our operational and financial results, including medical costs and per-participant revenue true-ups, will experience some variability depending upon the time of year in which they are measured. Medical costs vary most significantly as a result of (i) the weather, with certain illnesses, such as the influenza and COVID-19 viruses, being more prevalent during colder months of the year, which generally increases per-participant costs, and (ii) the number of business days in a period, with shorter periods generally having lower medical costs, all else equal. Per-participant revenue true-ups represent the difference between our estimate of per-participant capitation revenue to be received and actual revenue received from CMS, which is based on CMS’s determination of a participant’s RAF score as measured twice per year and is based on the evolving acuity of a participant. Where there is a difference between our estimate and the final determination from CMS, we may record either an increase or decrease in true-up revenue. Historically, these true-up payments typically occur between May and August, but the timing of these payments is determined by CMS, and we have neither visibility into nor control over the timing of such payments. The variability of participant enrollments during the open enrollment period has also been impacted by additional offerings by MA and other competitors. We believe that, as a result of these additional offerings, we experienced higher than expected disenrollments during the third quarter of fiscal 2024.

Current wording

•Seasonality of our business. Our operational and financial results, including medical costs and per-participant revenue true-ups, will experience some variability depending upon the time of year in which they are measured. Medical costs vary most significantly as a result of (i) the weather, with certain illnesses, such as the influenza and COVID-19 viruses, being more prevalent during colder months of the year, which generally increases per-participant costs, and (ii) the number of business days in a period, with shorter periods generally having lower medical costs, all else equal. Per-participant revenue true-ups represent the difference between our estimate of per-participant capitation revenue to be received and actual revenue received from CMS, which is based on CMS’s determination of a participant’s RAF score as measured twice per year and is based on the evolving acuity of a participant. Where there is a difference between our estimate and the final determination from CMS, we may record either an increase or decrease in true-up revenue. Historically, these true-up payments typically occur between May and August, but the timing of these payments is determined by CMS, and we have neither visibility into nor control over the timing of such payments. The variability of participant enrollments during the open enrollment period has also been impacted by additional offerings by MA and other competitors.

Previous wording

Capitation revenue. Capitation revenue was $208.7 million for the three months ended December 31, 2024, an increase of $20.1 million, or 10.7%, compared to $188.6 million for the three months ended December 31, 2023. This increase was driven by a $0.7 million, or 0.3%, increase in capitation rates coupled with $19.4 million, or 10.3%, increase in member months for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023. The increase in capitation rates for the three months ended December 31, 2024 was primarily driven by (i) a 5.2% annual increase in Medicaid capitation rates as determined by the States partially offset by revenue reserve and (ii) a 1.6% decrease in Medicare capitation rates as a result of an out of cycle risk score true up payment received in the prior year. The increase in member months was primarily due to growth in our California and Colorado centers and to a lesser extent due to the addition of de novo centers in Florida and the Concerto acquisition.

Current wording

Capitation revenue. Capitation revenue was $217.8 million for the three months ended March 31, 2025, an increase of $25.1 million, or 13.0%, compared to $192.8 million for the three months ended March 31, 2024. This increase was driven by a $4.4 million, or 2.1%, increase in capitation rates coupled with $20.7 million, or 10.7%, increase in member months for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The increase in capitation rates for the three months ended March 31, 2025 was primarily driven by (i) a 8.8% annual increase in Medicaid capitation rates as determined by the States partially offset by revenue reserve and (ii) a 3.7% increase in Medicare capitation rates partially offset by risk score true up accrual timing compared to the prior year. The increase in member months was primarily due to growth in our California and Colorado centers and to a lesser extent due to the addition of de novo centers in Florida and the Concerto acquisition.

Previous wording

Capitation revenue was $413.5 million for the six months ended December 31, 2024, an increase of $42.7 million, or 11.5%, compared to $370.7 million for the six months ended December 31, 2023. This increase was driven by a $6.2 million, or 1.5%, increase in capitation rates coupled with a $36.6 million, or 9.9%, increase in member months for the six months ended December 31, 2024 as compared to the six months ended December 31, 2023. The increase in capitation rates includes a 5.5% increase in Medicaid rates partially offset by revenue reserve and a 0.4% decrease in Medicare rates due to an out of cycle risk score true up payment received in the prior year.

Current wording

Capitation revenue was $631.3 million for the nine months ended March 31, 2025, an increase of $67.8 million, or 12.0%, compared to $563.5 million for the nine months ended March 31, 2024. This increase was driven by a $10.6 million, or 1.7%, increase in capitation rates coupled with a $57.2 million, or 10.2%, increase in member months for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024. The increase in capitation rates includes a 6.6% increase in Medicaid rates partially offset by revenue reserve and a 2.6% increase in Medicare rates partially offset by an out of cycle risk score true up payment received in the prior year. The increase in member months was primarily due to growth in our California and Colorado centers and to a lesser extent due to the addition of de novo centers in Florida and the Concerto acquisition.

Previous wording

External provider costs. External provider costs were $107.9 million for the three months ended December 31, 2024, an increase of $6.9 million, or 6.8%, compared to $101.0 million for the three months ended December 31, 2023. The increase was driven by an increase of $10.4 million, or 10.3%, in member months partially offset by a decrease of $3.5 million, or 3.1% in cost per participant for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023. The decrease in cost per participant for the three months ended December 31, 2024 was primarily driven by a decrease in inpatient, assisted living, permanent nursing facility, and short stay skilled nursing facility utilization coupled with a decrease in external hospice care associated with the transition of this function to internal clinical resources. This was partially offset by an increase in inpatient unit cost, an annual increase in pharmacy cost, and an annual increase in assisted living and permanent nursing facility unit cost.

Current wording

External provider costs. External provider costs were $107.9 million for the three months ended March 31, 2025, an increase of $7.9 million, or 7.9%, compared to $100.0 million for the three months ended March 31, 2024. The increase was driven by an increase of $10.7 million, or 10.7%, in member months partially offset by a decrease of $2.8 million, or 2.5% in cost per participant for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. The decrease in cost per participant for the three months ended March 31, 2025 was primarily driven by a decrease in assisted living, permanent nursing facility, and short stay skilled nursing facility utilization, a decrease in external hospice care associated with the transition of this function to internal clinical resources, and a decrease in pharmacy expense associated with higher rebates and the transition to in-house pharmacy services. The decrease in cost per participant was partially offset by an increase in inpatient unit cost, and an annual increase in assisted living and permanent nursing facility unit cost.

Previous wording

External provider costs were $215.1 million for the six months ended December 31, 2024, an increase of $14.8 million, or 7.4%, compared to $200.3 million for the six months ended December 31, 2023. This increase was driven by an increase of $19.8 million, or 9.9%, in member months partially offset by a decrease of $5.0 million, or 2.3%, in cost per participant for the six months ended December 31, 2024 as compared to the six months ended December 31, 2023. The decrease in cost per participant was primarily driven by a decrease in inpatient, assisted living, permanent nursing facility and short stay skilled nursing facility utilization coupled with a decrease in external hospice care associated with the transition of this function to internal clinical resources. This was partially offset by an increase in inpatient unit cost, an annual increase in pharmacy cost, and an annual increase in assisted living and permanent nursing facility unit cost.

Current wording

External provider costs were $323.0 million for the nine months ended March 31, 2025, an increase of $22.7 million, or 7.5%, compared to $300.3 million for the nine months ended March 31, 2024. This increase was driven by an increase of $30.5 million, or 10.2%, in member months partially offset by a decrease of $7.8 million, or 2.4%, in cost per participant for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024. The decrease in cost per participant was primarily driven by a decrease in inpatient, assisted living, permanent nursing facility and short stay skilled nursing facility utilization, a decrease in external hospice care associated with the transition of this function to internal clinical resources, and a decrease in pharmacy expense associated with higher rebates and the transition to in-house pharmacy services. The decrease in cost per participant was partially offset by an increase in inpatient unit cost, and an annual increase in assisted living and permanent nursing facility unit cost.

Previous wording

Cost of care (excluding depreciation and amortization). Cost of care (excluding depreciation and amortization) expense was $64.1 million for the three months ended December 31, 2024, an increase of $9.7 million, or 17.9%, compared to $54.3 million for the three months ended December 31, 2023, due to an increase of $4.1 million, or 6.9%, in cost per participant coupled with an increase of $5.6 million, or 10.3%, in member months. The increase for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023 was primarily driven by (i) a $6.6 million increase in salaries, wages and benefits associated with increased headcount and higher wage rates, (ii) $0.9 million in contract provider expense in California associated with growth, (iii) $0.9 million in de novo occupancy and administrative expense associated with opening centers in Florida and the Concerto acquisition, and (iv) $0.8 million in increased software license fees.

Current wording

Cost of care (excluding depreciation and amortization). Cost of care (excluding depreciation and amortization) expense was $69.5 million for the three months ended March 31, 2025, an increase of $10.4 million, or 17.6%, compared to $59.1 million for the three months ended March 31, 2024, due to an increase of $4.1 million, or 6.3%, in cost per participant coupled with an increase of $6.3 million, or 10.7%, in member months. The increase in cost per participant and the increase in member months for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily driven by (i) a $6.3 million increase in salaries, wages and benefits associated with increased headcount and higher wage rates, (ii) $0.9 million in contract provider expense in California associated with growth, (iii) $2.1 million in third party fees and shipping costs associated with in-house pharmacy services, and (iv) $1.0 million in fleet costs including contract transportation.

Previous wording

Cost of care (excluding depreciation and amortization) expense was $127.4 million for the six months ended December 31, 2024, an increase of $17.9 million, or 16.3%, compared to $109.6 million for the six months ended December 31, 2023, due to an increase of $7.1 million, or 5.9%, in cost per participant coupled with an increase of $10.8 million, or 9.9%, in member months. The increase for the six months ended December 31, 2024 as compared to the six months ended December 31, 2023 was primarily driven by (i) a $12.3 million increase in salaries, wages, and benefits associated with increased headcount and higher wage rates, (ii) $1.6 million in increased software license fees, (iii) $1.6 million in de novo occupancy and administrative expense associated with opening centers in Florida and the Concerto acquisition, (iv) $1.5 million in contract provider expense in California associated with growth, and (v) $0.5 million in contract provider recruiting expense.

Current wording

Cost of care (excluding depreciation and amortization) expense was $196.9 million for the nine months ended March 31, 2025, an increase of $28.3 million, or 16.8%, compared to $168.6 million for the nine months ended March 31, 2024, due to an increase of $11.2 million, or 6.0%, in cost per participant coupled with an increase of $17.1 million, or 10.2%, in member months. The increase in cost per participant and the increase in member months for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024 was primarily driven by (i) a $18.6 million increase in salaries, wages, and benefits associated with increased headcount and higher wage rates, (ii) $1.5 million in increased software license fees, (iii) $1.9 million in de novo occupancy and administrative expense associated with opening centers in Florida and the Concerto acquisition, (iv) $2.4 million in contract provider expense in California associated with growth, (v) $2.1 million in third party fees and shipping costs associated with in-house pharmacy services, (vi) $0.5 million in contract provider recruiting expense, and (vii) $0.8 million in supplies and other administrative expense.

Previous wording

Sales and marketing. Sales and marketing expenses were $7.7 million for the three months ended December 31, 2024, an increase of $1.8 million, or 31.5%, compared to $5.9 million for the three months ended December 31, 2023, primarily due to increased headcount and marketing expense to support growth.

Current wording

Sales and marketing. Sales and marketing expenses were $6.9 million for the three months ended March 31, 2025, a decrease of $0.3 million, or 3.6%, compared to $7.2 million for the three months ended March 31, 2024, primarily due to lower marketing expense partially offset by increased headcount to support growth.

Previous wording

Sales and marketing expenses were $14.2 million for the six months ended December 31, 2024, an increase of $3.0 million, or 26.3%, compared to $11.2 million for the six months ended December 31, 2023 primarily due to increased headcount and marketing spend to support growth.

Current wording

Sales and marketing expenses were $21.1 million for the nine months ended March 31, 2025, an increase of $2.7 million, or 14.7%, compared to $18.4 million for the nine months ended March 31, 2024 primarily due to increased headcount and marketing spend to support growth.

Previous wording

Corporate, general and administrative. Corporate, general and administrative expenses were $28.1 million for the three months ended December 31, 2024, an increase of $2.9 million, or 11.3%, compared to $25.2 million for the three months ended December 31, 2023. This increase for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023 was primarily due to (i) $1.9 million increase in employee compensation and benefits as the result of an increase in headcount and wage rates to support compliance and bolster organizational capabilities, (ii) $0.9 million in consulting expense primarily in support of the pharmacy acquisition, (iii) $0.7 million in fees associated with claims payment integrity audits, (iv) $0.4 million increase in software license fees, and (v) $0.5 million in recruiting fees. These increases in cost were partially offset by (i) $1.4 million reduction in consulting expense associated with improving organizational capabilities including the transition to a new electronic medical record ("EMR") system and (ii) $0.5 million reduction in insurance expense.

Current wording

Corporate, general and administrative. Corporate, general and administrative expenses were $38.6 million for the three months ended March 31, 2025, an increase of $11.0 million, or 40.1%, compared to $27.5 million for the three months ended March 31, 2024. This increase for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily due to (i) accrual of $10.7 million for the anticipated settlement of the stockholder lawsuit (ii) $1.9 million increase in employee compensation and benefits as the result of an increase in headcount and wage rates to support compliance and bolster organizational capabilities and (iii) $0.5 million in fees associated with claims payment integrity audits. These increases were partially offset by (i) $0.3 million decrease in software license fees, (ii) $0.2 million reduction in recruiting fees, (iii) $0.6 million reduction in consulting expense associated with improving organizational capabilities including the transition to a new electronic medical record ("EMR") system, (iv) $0.5 million reduction in insurance expense, and (v) $0.4 million decrease in contract services.

Previous wording

Corporate, general and administrative expenses were $55.6 million for the six months ended December 31, 2024, an increase of $1.4 million, or 2.7%, compared to $54.2 million for the six months ended December 31, 2023. This increase for the six months ended December 31, 2024 as compared to the six months ended December 31, 2023 was primarily due to (i) $4.3 million increase in employee compensation and benefits as the result of an increase in headcount and wage rates to support compliance and bolster organizational capabilities, (ii) $0.9 million in fees associated with claims payment integrity audits, (iii) $0.6 million in recruiting fees (iv) $0.5 million in consulting expense, and (v) $0.4 million increase in software license fees. These increases in cost were partially offset by (i) $4.0 million reduction in consulting expense associated with improving organizational capabilities including the transition to a new EMR system and (ii) $1.0 million reduction in insurance expense.

Current wording

Corporate, general and administrative expenses were $94.2 million for the nine months ended March 31, 2025, an increase of $12.5 million, or 15.3%, compared to $81.7 million for the nine months ended March 31, 2024. This increase for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024 was primarily due to (i) $10.7 million for the anticipated settlement of the stockholder lawsuit, (ii) $6.2 million increase in employee compensation and benefits as the result of an increase in headcount and wage rates to support compliance and bolster organizational capabilities, (iii) $1.4 million in fees associated with claims payment integrity audits, and (iv) $0.4 million in recruiting fees. These increases in cost were partially offset by (i) $4.7 million reduction in consulting expense associated with improving organizational capabilities including the transition to a new EMR system and (ii) $1.4 million reduction in insurance expense.

Previous wording

Impairment of right-of-use ("ROU") asset and construction in progress. Impairment of ROU asset and construction in progress were $8.5 million for each of the three and six months ended December 31, 2024. This increase was due to the Company recording a $1.4 million impairment of operating lease ROU assets and a $7.1 million impairment of construction in progress during each of the three and six months ended December 31, 2024, related to halting developments to a previously planned de novo center in Louisville, Kentucky that the Company is no longer pursuing. There were no impairments recorded during the three and six months ended December 31, 2023.

Current wording

Impairment of right-of-use ("ROU") asset and construction in progress. Impairment of ROU asset and construction in progress were $8.5 million for the nine months ended March 31, 2025. This increase was due to the Company recording a $1.4 million impairment of operating lease ROU assets and a $7.1 million impairment of construction in progress during the nine months ended March 31, 2025, related to halting developments to a previously planned de novo center in Louisville, Kentucky that the Company is no longer pursuing. There were no impairments recorded during the three months ended March 31, 2025 and the three and nine months ended March 31, 2024.

Previous wording

Interest expense, net. Interest expense, net, consists primarily of interest payments on our outstanding borrowings, net of interest income earned on our cash and cash equivalents and restricted cash. Interest expense, net was $0.8 million for the three months ended December 31, 2024, a decrease of $0.2 million, or 18.7%, compared to $0.9 million for the three months ended December 31, 2023. The decrease for the three months ended December 31, 2024 as compared to the three months ended December 31, 2023 was primarily due to interest expense of $1.6 million, which was partially offset by interest income of $0.9 million from money market funds for the three months ended December 31, 2024. Interest expense of $1.8 million was partially offset by interest income of $0.9 million during the three months ended December 31, 2023.

Current wording

Interest expense, net. Interest expense, net, consists primarily of interest payments on our outstanding borrowings, net of interest income earned on our cash and cash equivalents and restricted cash. Interest expense, net was $1.2 million for the three months ended March 31, 2025, a decrease of $0.1 million, or 13.5%, compared to $1.0 million for the three months ended March 31, 2024. The decrease for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily due to interest expense of $1.4 million, which was partially offset by interest income of $0.3 million from money market funds for the three months ended March 31, 2025. Interest expense of $1.8 million was partially offset by interest income of $0.7 million during the three months ended March 31, 2024.

Previous wording

Interest expense, net was $1.4 million for the six months ended December 31, 2024, a decrease of $0.2 million, or 11.8%, compared to $1.6 million for the six months ended December 31, 2023. This decrease for the six months ended December 31, 2024 as compared to the six months ended December 31, 2023 was due to interest expense of $3.4 million, which was partially offset by interest income of $2.0 million from money market funds for the six months ended December 31, 2024. Interest expense of $3.6 million was partially offset by interest income of $2.0 million during the six months ended December 31, 2023.

Current wording

Interest expense, net was $3.7 million for the nine months ended March 31, 2025, a decrease of $1.1 million, or 42.0%, compared to $2.6 million for the nine months ended March 31, 2024. This decrease for the nine months ended March 31, 2025 as compared to the nine months ended March 31, 2024 was due to interest expense of $4.9 million, which was partially offset by interest income of $1.1 million from money market funds for the nine months ended March 31, 2025. Interest expense of $5.3 million was partially offset by interest income of $2.7 million during the nine months ended March 31, 2024.

Previous wording

Other income (expense). Other income (expense) consists primarily of the net proceeds received from the sale of or disposal of property and equipment and unrealized gains and losses related to short-term investments. Other income for the three months ended December 31, 2024 decreased $1.0 million, or 118.0%, compared to the three months ended December 31, 2023. The decrease was primarily due to unrealized gains of $0.1 million for the three months ended December 31, 2024 compared to unrealized gains of $0.2 million for the three months ended December 31, 2023.

Current wording

Other income (expense). Other income (expense) consists primarily of the net proceeds received from the sale of or disposal of property and equipment and unrealized gains and losses related to short-term investments. Other income for the three months ended March 31, 2025 decreased $0.3 million, or 51.0%, compared to the three months ended March 31, 2024. The decrease was primarily due to dividends received of $0.5 million for the three months ended March 31, 2025, which was partially offset by loss on disposal of assets of $0.2 million, compared to dividends received of $0.6 million for the three months ended March 31, 2024.

Previous wording

Other income (expense) for the six months ended December 31, 2024 decreased $1.4 million, or 94.7%, compared to the six months ended December 31, 2023. This decrease was primarily due to dividends received of $1.2 million during the six months ended December 31, 2023 compared to none in the current period.

Current wording

Other income (expense) for the nine months ended March 31, 2025 decreased $0.6 million, or 27.1%, compared to the nine months ended March 31, 2024. This decrease was primarily due to dividends received of $1.6 million during the nine months ended March 31, 2025 compared to dividends received of $1.8 million for the nine months ended March 31, 2024.

Previous wording

Gain (loss) on equity method investment. Gain (loss) in equity method investment was negligible for the three and six months ended December 31, 2024, an increase of $1.9 million, or 100.9%, compared to $1.9 million for the three and six months ended December 31, 2023. The increase was due to the recognized impairment losses of $1.9 million related to our minority equity investment in Jetdoc during the three and six months ended December 31, 2023.

Current wording

Gain (loss) on equity method investment. Gain (loss) in equity method investment was negligible for the three and nine months ended March 31, 2025, an increase of $0.1 million and $2.0 million, or 100.0% and 100.8%, compared to $0.1 million and $2.0 million for the three and nine months ended March 31, 2024. The increase was due to the recognized impairment losses of $1.0 million and $2.0 million related to our minority equity investment in Jetdoc during the three and nine months ended March 31, 2024.

Previous wording

The Company and its subsidiaries calculate federal and state income taxes currently payable and for deferred income taxes arising from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to enacted tax laws and rates applicable to periods in which those temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. The members of InnovAge Senior Housing Thornton, LLC ("SH1") and InnovAge Sacramento have elected to be taxed as partnerships, and no provision (benefit) for income taxes for SH1 or InnovAge Sacramento is included in the condensed consolidated financial statements. Further, the Company entered into a joint venture called InnovAge Florida PACE –

Current wording

The Company and its subsidiaries calculate federal and state income taxes currently payable and for deferred income taxes arising from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to enacted tax laws and rates applicable to periods in which those temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. The members of InnovAge Senior Housing Thornton, LLC ("SH1") and InnovAge Sacramento have elected to be taxed as partnerships, and no provision (benefit) for income taxes for SH1 or InnovAge Sacramento is included in the condensed consolidated financial statements. Further, the Company entered into a joint venture called InnovAge Florida PACE – Orlando on May 28, 2024 and its members elected to be taxed as a partnership. No provision (benefit) for income taxes for InnovAge Orlando is included in the condensed consolidated financial statements for activity occurring from joint venture formation date through the balance of the fiscal year.

Previous wording

During the three months ended December 31, 2024 and 2023, we reported an income tax expense of $0.03 million and $0.1 million, respectively. During the six months ended December 31, 2024 and 2023, we reported an income tax expense of $0.4 million and $0.3 million, respectively. The decrease of $0.1 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023, was primarily due to (i) our pretax book loss recognized during the six months ended December 31, 2024, as compared to pretax book loss recognized during the six months ended December 31, 2023, (ii) a discrete item to account for the impact of the decreasing Pennsylvania tax rate on our state deferred tax liabilities, and (iii) the change in our valuation allowance.

Current wording

During the three months ended March 31, 2025 and 2024, we reported an income tax expense (benefit) of $0.1 million and $(0.2) million, respectively. During the nine months ended March 31, 2025 and 2024, we reported an income tax expense of $0.5 million and $0.1 million, respectively. The decrease of $0.4 million for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024, was primarily due to (i) our pretax book loss recognized during the nine months ended March 31, 2025, as compared to pretax book loss recognized during the nine months ended March 31, 2024, (ii) a discrete item to account for the impact of the decreasing Pennsylvania tax rate on our state deferred tax liabilities, and (iii) the change in our valuation allowance.

Previous wording

The Company's management uses Center-level Contribution Margin as the measure for assessing performance of its operating segments. We define Center-level Contribution Margin as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which includes all medical and pharmacy costs. For purposes of evaluating Center-level Contribution Margin on a center-by-center basis, we do not allocate our sales and marketing expenses or corporate, general and administrative expenses across our centers. Center-level Contribution Margin was $71.6 million and $61.5 million for the six months ended December 31, 2024 and 2023, respectively. The increase in Center-level Contribution Margin for the six months ended December 31, 2024 compared to the six months ended December 31, 2023 was primarily due to a 11.5% increase in total revenue, offset by a 10.5% increase in external provider costs and cost of care, excluding depreciation and amortization, during the same period. For more information relating to Center-level Contribution Margin, see Note 14 “Segment Reporting” to our condensed consolidated financial statements. A reconciliation of Center-level Contribution Margin to loss before income taxes, the most directly comparable GAAP measure, for each of the periods is as follows:

Current wording

The Company's management uses Center-level Contribution Margin as the measure for assessing performance of its operating segments. We define Center-level Contribution Margin as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which includes all medical and pharmacy costs. For purposes of evaluating Center-level Contribution Margin on a center-by-center basis, we do not allocate our sales and marketing expenses or corporate, general and administrative expenses across our centers. Center-level Contribution Margin was $112.4 million and $95.5 million for the nine months ended March 31, 2025 and 2024, respectively. The increase in Center-level Contribution Margin for the nine months ended March 31, 2025 compared to the nine months ended March 31, 2024 was primarily due to a 12.0% increase in total revenue, offset by a 10.9% increase in external provider costs and cost of care, excluding depreciation and amortization, during the same period. For more information relating to Center-level Contribution Margin, see Note 14 “Segment Reporting” to our condensed consolidated financial statements. A reconciliation of Center-level Contribution Margin to loss before income taxes, the most directly comparable GAAP measure, for each of the periods is as follows:

Previous wording

We define Adjusted EBITDA as net loss adjusted for interest expense, net, other investment income, depreciation and amortization, and provision (benefit) for income tax as well as addbacks for non-recurring expenses or exceptional items, including charges relating to management equity compensation, litigation costs and settlements, M&A diligence, transaction and integration, business optimization, EMR implementation, impairment of ROU asset and construction in progress, and loss on minority equity interest. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue. For the six months ended December 31, 2024 and 2023, net loss was $19.2 million and $14.8 million, respectively, representing a year-over-year decrease of 29.9%. Adjusted EBITDA was $12.3 million and $8.3 million, for the six months ended December 31, 2024 and 2023, respectively, representing a year-over-year increase of 49.1%. For the six months ended December 31, 2024, net loss margin was 4.6%, as compared to net loss margin of 4.0% for the six months ended December 31, 2023. For the six months ended December 31, 2024, our Adjusted EBITDA margin was 3.0%, as compared to our Adjusted EBITDA margin for the six months ended December 31, 2023 of 2.2%. The increase in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to (i) increased capitation rates and (ii) lower per participant external provider costs, partially offset by (i) increased center-level headcount and wage rates associated with census growth and a competitive labor market and (ii) increased sales and marketing and corporate, general and administrative expense.

Current wording

We define Adjusted EBITDA as net loss adjusted for interest expense, net, other investment income, depreciation and amortization, and provision (benefit) for income tax as well as addbacks for non-recurring expenses or exceptional items, including charges relating to management equity compensation, litigation costs and settlements, M&A diligence, transaction and integration, business optimization, EMR implementation, impairment of ROU asset and construction in progress, and loss on minority equity interest. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue. For the nine months ended March 31, 2025 and 2024, net loss was $30.3 million and $21.0 million, respectively, representing a year-over-year decrease of 44.7%. Adjusted EBITDA was $23.1 million and $11.2 million, for the nine months ended March 31, 2025 and 2024, respectively, representing a year-over-year increase of 105.9%. For the nine months ended March 31, 2025, net loss margin was 4.8%, as compared to net loss margin of 3.7% for the nine months ended March 31, 2024. For the nine months ended March 31, 2025, our Adjusted EBITDA margin was 3.7%, as compared to our Adjusted EBITDA margin for the nine months ended March 31, 2024 of 2.0%. The increase in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to (i) increased census, (ii) increased capitation rates and (iii) lower per participant external provider costs, partially offset by (i) increased center-level headcount and wage rates associated with census growth and a competitive labor market and (ii) increased costs associated with transition to in-house pharmacy services.

Previous wording

Adjusted EBITDA and Adjusted EBITDA margin are supplemental measures of operating performance monitored by management that are not defined under GAAP and that do not represent, and should not be considered as, an alternative to net loss and net loss margin, respectively, as determined by GAAP. We believe that Adjusted EBITDA and Adjusted EBITDA margin are appropriate measures of operating performance because the metrics eliminate the impact of revenue and expenses that do not relate to our ongoing business performance and certain noncash expenses, allowing us to more effectively evaluate our core operating performance and trends from period to period. We believe that Adjusted EBITDA and Adjusted EBITDA margin help investors and analysts in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including net loss and net loss margin. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by the types of items excluded from the calculation of Adjusted EBITDA. The use of the term Adjusted EBITDA varies from others in our industry. Effective for the year ended June 30, 2024 and going forward, the Company revised its calculation of Adjusted EBITDA to no longer exclude de novo center development costs and to reflect the impact of other investment income. The presentation for the six months ended December 31, 2023 has been recast to conform to the current presentation.

Current wording

Adjusted EBITDA and Adjusted EBITDA margin are supplemental measures of operating performance monitored by management that are not defined under GAAP and that do not represent, and should not be considered as, an alternative to net loss and net loss margin, respectively, as determined by GAAP. We believe that Adjusted EBITDA and Adjusted EBITDA margin are appropriate measures of operating performance because the metrics eliminate the impact of revenue and expenses that do not relate to our ongoing business performance and certain noncash expenses, allowing us to more effectively evaluate our core operating performance and trends from period to period. We believe that Adjusted EBITDA and Adjusted EBITDA margin help investors and analysts in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including net loss and net loss margin. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by the types of items excluded from the calculation of Adjusted EBITDA. The use of the term Adjusted EBITDA varies from others in our industry. Effective for the year ended June 30, 2024 and going forward, the Company revised its calculation of Adjusted EBITDA to no longer exclude de novo center development costs and to reflect the impact of other investment income. The presentation for the nine months ended March 31, 2024 has been recast to conform to the current presentation.

Previous wording

(a)Reflects investment income related to short-term investments included in our consolidated statement of operations. Effective for the year ended June 30, 2024 and going forward, the Company has revised the calculation for Adjusted EBITDA to reflect the impact of investment income. The presentation for the three and six months ended December 31, 2023 has been recast to reflect the impact of other investment income.

Current wording

(a)Reflects investment income related to short-term investments included in our consolidated statement of operations. Effective for the year ended June 30, 2024 and going forward, the Company revised the calculation for Adjusted EBITDA to reflect the impact of investment income. The presentation for the three and nine months ended March 31, 2024 has been recast to reflect the impact of other investment income.

Previous wording

(b)Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center, and civil investigative demands. Refer to Note 9, "Commitments and Contingencies" to our condensed consolidated financial statements for more information regarding litigation by stockholders and civil investigative demands. 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.

Current wording

(b)Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center, and civil investigative demands. Refer to Note 9, "Commitments and Contingencies" to our condensed consolidated financial statements for more information regarding litigation by stockholders and civil investigative demands. 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. For the three and nine months ended March 31, 2025, includes $10.7 million accrued in connection with the potential settlement of the previously disclosed stockholder class action.

Previous wording

(c)Reflects charges related to M&A transaction and integrations. The presentation for the three and six months ended December 31, 2023 has been recast to no longer exclude de novo center development costs.

Current wording

(c)Reflects charges related to M&A transaction and integrations. The presentation for the three and nine months ended March 31, 2024 has been recast to no longer exclude de novo center development costs.

Previous wording

For the three months ended December 31, 2024, this primarily includes costs related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the six months ended December 31, 2024, this includes (i) $0.4 million of costs associated with organizational restructure and (ii) $0.3 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) $0.4 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing 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 six months ended December 31,2023, this includes (i) $2.2 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing capabilities, and strengthen our enterprise capabilities, (ii) $0.3 million of costs associated with organizational restructure, and (iii) $0.4 million related to other non-recurring projects aimed at reducing costs and improving efficiencies.

Current wording

(d)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, 2025, this primarily includes costs related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the nine months ended March 31, 2025, this includes (i) $0.4 million of costs associated with organizational restructure and (ii) $0.4 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the three months ended March 31, 2024, this includes (i) $0.4 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing capabilities, and strengthen our enterprise capabilities and (ii) $0.3 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the nine months ended March 31, 2024, this includes (i) $2.6 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing capabilities, and strengthen our enterprise capabilities, (ii) $0.3 million of costs associated with organizational restructure, and (iii) $0.8 million related to other non-recurring projects aimed at reducing costs and improving efficiencies.

Previous wording

(f)Reflects impairment charges related to ROU asset and construction in progress related to halting developments to a previously planned de novo center in Louisville, Kentucky that the Company is no longer pursuing.

Current wording

(f)Reflects (i) impairment charges related to ROU asset and construction in progress related to halting developments to a previously planned de novo center in Louisville, Kentucky that the Company is no longer pursuing and (ii) loss on sale of center equipment that was originally purchased for the center in Louisville, Kentucky.

Previous wording

To date, we have financed our operations principally through cash flows from operations and through borrowings under our credit facilities, and from the sale of common stock in our IPO that occurred in March 2021. As of December 31, 2024, we had cash and cash equivalents of $46.1 million, a decrease of $10.8 million from June 30, 2024. The decrease in cash and cash equivalents was primarily due to timing of cash receipts for services provided and share repurchase activity. Our cash and cash equivalents primarily consist of highly liquid investments in demand deposit accounts and cash.

Current wording

To date, we have financed our operations principally through cash flows from operations and through borrowings under our credit facilities, and from the sale of common stock in our IPO that occurred in March 2021. As of March 31, 2025, we had cash and cash equivalents of $60.5 million, an increase of $3.6 million from June 30, 2024, and short-term investments of $41.3 million, a decrease of $4.6 million from June 30, 2024. The decrease in cash and cash equivalents and short-term investments was primarily due to timing of cash receipts for services provided and share repurchase activity. Our cash and cash equivalents primarily consist of highly liquid investments in demand deposit accounts and cash. Our short-term investments primarily consist of investments in mutual funds.

Previous wording

Our capital resources are generally used to fund (i) debt service requirements, the majority of which relate to the quarterly principal payments of the Term Loan Facility (as defined below) due 2026, (ii) finance and operating lease obligations, which are generally paid on a monthly basis and include maturities through 2028 and 2032, respectively, (iii) the operations of our business, (iv) income tax payments, which are generally due on a quarterly and annual basis, (v) capital additions, which include acquisitions and de novo centers, and (vi) share repurchases authorized under the Board approved program. We also plan to continue investing in resources and initiatives to provide necessary and quality services to our participants. Collectively, these obligations are expected to represent a significant liquidity requirement of our Company on both a short-term (next 12 months) and long-term (beyond 12 months) basis.

Current wording

Our capital resources are generally used to fund (i) debt service requirements, the majority of which relate to the quarterly principal payments of the Term Loan Facility (as defined below) due 2026, (ii) finance and operating lease obligations, which are generally paid on a monthly basis and include maturities through 2028 and 2032, respectively, (iii) the operations of our business, (iv) income tax payments, which are generally due on a quarterly and annual basis, (v) capital additions, which include acquisitions and de novo centers, and (vi) share repurchases authorized under the Board approved program. We also plan to continue investing in resources and initiatives to provide necessary and quality services to our participants. Collectively, these obligations are expected to represent a considerable liquidity requirement of our Company on both a short-term (next 12 months) and long-term (beyond 12 months) basis.

Previous wording

As of December 31, 2024, we had $64.1 million of long-term debt outstanding. As of December 31, 2024, we had future minimum operating lease payments under non-cancellable leases through the year 2037 of $38.8 million. We also had non-cancellable finance lease agreements with third parties through the year 2028 with future minimum payments of $19.5 million. For additional information, see Note 7, “Leases”, Note 8, “Long-Term Debt”, and Note 9, “Commitments and Contingencies” in our condensed consolidated financial statements.

Current wording

As of March 31, 2025, we had future minimum operating lease payments under non-cancellable leases through the year 2037 of $39.2 million. We also had non-cancellable finance lease agreements with third parties through the year 2030 with future minimum payments of $22.0 million. For additional information, see Note 7, “Leases”, Note 8, “Long-Term Debt”, and Note 9, “Commitments and Contingencies” in our condensed consolidated financial statements.

Previous wording

We believe that our cash and cash equivalents and our cash flows from operations, available funds, and access to financing sources, including our Revolving Credit Facility (each discussed and defined below), will be sufficient to fund our operating and capital needs for the next 12 months and beyond. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, our ability to retain and grow the number of PACE participants, and the expansion of sales and marketing activities and other costs of operating the business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.

Current wording

We believe that our cash and cash equivalents and our cash flows from operations, available funds, and access to financing sources, including our Revolving Credit Facility (each discussed and defined below), will be sufficient to fund our operating and capital needs for the next 12 months and beyond. We currently intend to extend or refinance our Term Loan Facility prior to maturity, and believe we have adequate liquidity to meet our anticipated financing needs. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, our ability to retain and grow the number of PACE participants, and the expansion of sales and marketing activities and other costs of operating the business. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies. In addition, there can be no assurances that we will be able to extend or replace our Term Loan Facility on commercially reasonable terms, and for this and other reasons we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.