InnovAge Holding Corp.

Previous wording

InnovAge Holding Corp. (“InnovAge”) became a public company in March 2021. As of September 30, 2025, the Company served approximately 7,890 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 December 31, 2025, the Company served approximately 8,010 PACE participants, and operated 20 PACE centers across California, Colorado, Florida, New Mexico, Pennsylvania, and Virginia.

Previous wording

Increased cost of care and external provider costs. We anticipate increased cost of care from our third-party service providers in an effort to offset their heightened expenses resulting, in part, from budget pressures due to the OBBBA as well as budget cuts to providers from state Medicaid programs, as well as possible increases in cost of medical and other supplies used in order to provide healthcare services. While we did not experience a material increase to our cost of care during the first quarter of fiscal year 2026, we continue to monitor the situation. We believe that our clinical value initiatives and operational value initiatives, which continue to be developed, may assist us in offsetting the increased cost of care anticipated for fiscal year 2026.

Current wording

Increased cost of care and external provider costs. We anticipate increased cost of care from our third-party service providers in an effort to offset their heightened expenses resulting, in part, from budget pressures due to the OBBBA as well as budget cuts to providers from state Medicaid programs, as well as possible increases in cost of medical and other supplies used in order to provide healthcare services. While we did not experience a material increase to our cost of care during the second quarter of fiscal year 2026, we continue to monitor the situation. We believe that our clinical value initiatives and operational value initiatives, which continue to be developed, may assist us in offsetting the increased cost of care anticipated for the second half of fiscal year 2026.

Previous wording

Labor market and access to supportive housing facilities. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals, which continued through the first quarter of fiscal year 2026. Competition from health systems and home health providers for nurses, drivers and caregivers has intensified, further challenging the Company’s ability to recruit and retain staff. In addition, there are systemic challenges related to workforce training and the pipeline of qualified professionals, which have not kept pace with this growing demand. These labor market pressures have increased wage and benefit costs, and have also affected our staffing ability which could impact our enrollment capacity and services. To mitigate these challenges, we implemented targeted compensation and retention initiatives, along with operational measures to help improve productivity and reduce reliance on agency staffing. Partially as a result of increased competition and other market trends, in conjunction with increased staffing related to our growth, there was an increase in the cost of care for the first quarter of fiscal year 2026 compared to the comparable period for fiscal year 2025, as discussed in "Results of Operations" below.

Current wording

Labor market and access to supportive housing facilities. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals, which continued through the second quarter of fiscal year 2026. Competition from health systems and home health providers for nurses, drivers and caregivers, in addition to the systemic challenges related to workforce training and the pipeline of qualified professionals, has remained challenging for the Company’s ability to recruit and retain staff. These labor market pressures have increased wage and benefit costs, and have also affected our staffing ability which could impact our enrollment capacity and services. To mitigate these challenges, we implemented targeted compensation in line with the markets in which we operate and focused retention programs for critical roles, along with operational measures to help improve productivity and continue reducing reliance on agency staffing. Partially as a result of increased competition and other market trends, in conjunction with increased staffing related to our growth, there was an increase in the cost of care for the second quarter of fiscal year 2026 compared to the comparable period for fiscal year 2025, as discussed in "Results of Operations" below.

Previous wording

Census and capitation revenue. The delays and increased gaps in eligibility both for new enrollments and Medicaid redetermination applications that we experienced during fiscal years 2025 and 2024 due to processing delays and other enrollment and redetermination procedures that vary by State and county continued into the first quarter of fiscal year 2026, though to a lesser degree. While processing delays generally reduced in measure during the first quarter of fiscal year 2026, it is possible that these delays could persist or be exacerbated due to potential impacts of the OBBBA. This has not yet had a material effect on the Company’s financial statements or operations; however, we continue to monitor the effects.

Current wording

Census and capitation revenue. The delays and increased gaps in eligibility both for new enrollments and Medicaid redetermination applications that we experienced during fiscal years 2025 and 2024 due to processing delays and other enrollment and redetermination procedures that vary by State and county continued into the second quarter of fiscal year 2026, though to a lesser degree than experienced at the end of fiscal year 2025. While processing delays generally reduced in measure during the first half of fiscal year 2026, it is possible that these delays could persist or be exacerbated due to potential future impacts of the OBBBA. This has not yet had a material effect on the Company’s financial statements or operations; however, we continue to monitor the effects.

Previous wording

Medicaid Spending. The OBBBA adopted in July 2025, mandates significant reductions in federal Medicaid spending, introduces new work requirements for Medicaid beneficiaries aged 19 to 64 and cost-sharing measures for certain Medicaid beneficiaries, and requires states to conduct bi-annual eligibility verifications of Medicaid enrollees in the expansion population. These changes may lead to decreased Medicaid enrollment among existing and prospective PACE participants, potentially reducing our funding and decreasing margins. With the federal funding cuts and states being prohibited from increasing provider taxes to finance their share of Medicaid spending, states may also face budgetary pressures. Such budgetary pressure may potentially lead to reductions in certain optional Medicaid benefits, reductions in the workforce for the government entities that oversee and administer Medicaid and PACE, causing delays, and downward pressure on rates, including our capitated fee payment. Finally, the new requirements may necessitate adjustments in our administrative processes to ensure compliance with more frequent eligibility verifications and other reporting standards mandated by federal and state regulatory agencies. Changes in verification requirements have not yet taken effect and we expect more information to be available following each states' confirmed budgeting process.

Current wording

Medicaid Spending. The OBBBA adopted in July 2025, mandates significant reductions in federal Medicaid spending, introduces new work requirements for Medicaid beneficiaries aged 19 to 64 and cost-sharing measures for certain Medicaid beneficiaries, and requires states to conduct bi-annual eligibility verifications of Medicaid enrollees in the expansion population. With the federal funding cuts and states being prohibited from increasing provider taxes to finance their share of Medicaid spending, states may also face budgetary pressures. Such budgetary pressure may potentially lead to reductions in certain optional Medicaid benefits, reductions in the workforce for the government entities that oversee and administer Medicaid and PACE, causing delays, and downward pressure on rates, including our capitated fee payment. Finally, the new requirements may necessitate adjustments in our administrative processes to ensure compliance with the OBBBA and other reporting standards mandated by federal and state regulatory agencies. Changes in verification requirements have not yet taken effect and we expect more information to be available following each states' confirmed budgeting process.

Previous wording

Macroeconomic Trends. Recent U.S. tariff announcements, retaliatory measures by other countries, and significant uncertainty surrounding trade tensions may result in higher prices for medical and other supplies and lead to supply chain disruptions and additional costs. The degree to which tariffs affect the global supply chain and our business will depend on their timing, duration and magnitude, which may be changed at any time and with little or no prior notice. We did not experience a material effect as result of these trade disputes during the first quarter of fiscal year 2026.

Current wording

Macroeconomic Trends. The imposition and suspension of tariffs by the U.S. government, which remain subject to change and legal challenges, retaliatory measures by other countries, and significant uncertainty surrounding trade tensions may result in higher prices for medical and other supplies and lead to supply chain disruptions and additional costs. The degree to which tariffs affect the global supply chain and our business will depend on their timing, duration and magnitude, which may be changed at any time and with little or no prior notice. We did not experience a material effect as result of these trade disputes during the first two quarters of fiscal year 2026.

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 2.43 based on InnovAge data as of September 30, 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 encounter data submission process 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 2.50 based on InnovAge data as of December 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 encounter data submission process so that our revenue more accurately reflects the acuity of the populations we serve.

Previous wording

Various factors, including increased salaries, wages and benefits, increased staffing, annual increases in assisted living and nursing facility unit cost and general medical inflation have affected our external provider costs and cost of care, excluding depreciation and amortization, which represented approximately 78% of our revenue in the three months ended September 30, 2025.

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. Various factors, including increased salaries, wages and benefits, increased staffing, annual increases in assisted living and nursing facility unit cost and general medical inflation have affected our external provider costs and cost of care, excluding depreciation and amortization, which represented approximately 78% of our revenue in the six months ended December 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 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 anticipate being able to leverage our fixed cost base at those centers and increase the value of a center to our business over time.

Previous wording

•Our ability to expand via de novo centers within existing and new markets. Several factors can affect our ability to open de novo centers, including sanctions issued by regulators, legal, community or other obstacles in the construction of such centers, and our ability to hire and train enough workers to ramp up these centers to maturity.

Current wording

•Our ability to expand via de novo centers within existing and new markets. Several factors can affect our ability to open de novo centers, including actions by local and state regulators, such as the moratorium issued in California by DHCS and any sanctions issued, legal, community or other obstacles in the construction or opening of such centers.

Previous wording

In response to an audit to our Sacramento center and a medical review of our San Bernardino center, which have been previously disclosed, the California Department of Health Care Services (“DHCS") notified us that it was suspending its attestations in support of the planned de novo center in Downey and the recently acquired planned de novo center in Bakersfield. CMS has closed its process and DHCS's process is ongoing. While the planned California de novo centers are precluded from opening at this time, DHCS notified us that it would consider restoring the State Attestations upon our successful remediation of the deficiencies raised in our Sacramento center and its completion of the medical review (and any potential resultant remediation that may be required) in our San Bernardino center.

Current wording

In response to an audit to our Sacramento center and a medical review of our San Bernardino center, which have been previously disclosed, DHCS suspended its attestations in support of the planned de novo center in Downey and Bakersfield, California. CMS has closed its process and DHCS's process is ongoing. On December 23, 2025, we received a formal Corrective Action Plan (CAP) from DHCS to remediate findings resulting from the San Bernardino medical review. We plan to work closely with the State to fulfill the obligations of the CAP. While the planned California de novo centers are precluded from opening at this time, DHCS notified us that it would consider restoring the State Attestations upon our successful remediation of the deficiencies raised in our Sacramento center and its completion of the medical review, including the resultant remediation, in our San Bernardino center.

Previous wording

•Execute tuck-in acquisitions, strategic transactions 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 with Orlando Health relating to our Orlando PACE center and the joint venture with Tampa General Hospital relating to our Tampa PACE center. In fiscal year 2025, we acquired certain pharmacy assets from Tabula Rasa HealthCare Group, Inc. (“TRHC”), with the goal of supporting our growth and improving pharmacy cost-management.

Current wording

•Execute tuck-in acquisitions, strategic transactions 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 anticipate increased revenue growth and 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 ventures with Orlando Health and Tampa General Hospital relating to our Orlando PACE center and our Tampa PACE center, respectively. In fiscal year 2025, we acquired certain pharmacy assets from Tabula Rasa HealthCare Group, Inc. (“TRHC”), with the goal of supporting our growth and improving pharmacy cost-management.

Previous wording

•Investing to support growth. We intend to continue investing in our centers, value-based care model, and sales and marketing organization to support long-term growth. We expect our expenses to increase in absolute dollars for the foreseeable future to support our growth due, partially, to additional costs we incur in connection with our audits to our centers, remediation plans and current and potential legal and regulatory proceedings. We plan to invest in future growth judiciously and maintain focus on managing our results of operations. During fiscal years 2024 and 2025, we made investments to increase our sophistication as a payor to drive clinical value, improve outcomes, and manage cost trends. We plan to continue investing in such activities in fiscal year 2026. Accordingly, in the short term, we expect these activities to increase our expenses as a percentage of revenue, but in the longer term, we anticipate that these investments will positively impact our business and results of operations.

Current wording

•Investing to support growth. We intend to continue investing in our centers, value-based care model, and sales and marketing organization to support long-term growth. We expect our expenses to increase in absolute dollars for the foreseeable future to support our growth due, partially, to additional costs we incur in connection with our audits to our centers, remediation plans and current and potential legal and regulatory proceedings. We plan to invest in future growth judiciously and maintain focus on managing our results of operations. Beginning in fiscal year 2024, we have made investments to increase our sophistication as a payor to drive clinical value, improve outcomes, and manage cost trends, and have continued investing in such activities in fiscal year 2026. Accordingly, in the short term, we expect these activities to increase our expenses as a percentage of revenue, but in the longer term, we anticipate that these investments will positively impact our business and results of operations.

Previous wording

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 and voluntary disenrollments has also been impacted by additional offerings by MA and other competitors including PACE organizations in select markets.

Current wording

•Seasonality of our business. Our operational and financial results, including medical costs and per-participant revenue true-ups, 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 and voluntary disenrollments has also been impacted by additional offerings by MA and other competitors including PACE organizations in select markets.

Previous wording

Capitation revenue. Capitation revenue was $235.8 million for the three months ended September 30, 2025, an increase of $31.0 million, or 15.1%, compared to $204.8 million for the three months ended September 30, 2024. This increase was driven by a $10.6 million, or 4.7%, increase in capitation rates coupled with $20.3 million, or 9.9%, increase in member months for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase in capitation rates for the three months ended September 30, 2025 was primarily driven by (i) a 7.9% 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. The increase in member months was primarily due to growth in our California, Florida, and Colorado centers.

Current wording

Capitation revenue. Capitation revenue was $239.6 million for the three months ended December 31, 2025, an increase of $30.9 million, or 14.8%, compared to $208.7 million for the three months ended December 31, 2024. This increase was driven by a $14.5 million, or 6.4%, increase in capitation rates coupled with a $16.5 million, or 7.9%, increase in member months for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024. The increase in capitation rates for the three months ended December 31, 2025 was primarily driven by (i) an 8.0% annual increase in Medicaid capitation rates as determined by the States partially offset by revenue reserve and (ii) a 4.1% increase in Medicare capitation rates. The increase in member months was primarily due to growth in our California, Florida, and Colorado centers.

Previous wording

External provider costs. External provider costs were $108.9 million for the three months ended September 30, 2025, an increase of $1.6 million, or 1.5%, compared to $107.2 million for the three months ended September 30, 2024. The increase was driven by an increase of $10.7 million, or 9.9%, in member months partially offset by a decrease of $9.0 million, or 7.6% in cost per participant for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decrease in cost per participant for the three months ended September 30, 2025 was primarily driven by a decrease in permanent nursing facility and short stay skilled nursing facility utilization, 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 annual increase in assisted living and permanent nursing facility unit cost.

Current wording

External provider costs. External provider costs were $112.0 million for the three months ended December 31, 2025, an increase of $4.1 million, or 3.8%, compared to $107.9 million for the three months ended December 31, 2024. The increase was driven by an increase of $8.5 million, or 7.9%, in member months partially offset by a decrease of $4.4 million, or 3.8% in cost per participant for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024. The decrease in cost per participant for the three months ended December 31, 2025 was primarily driven by a decrease in permanent nursing facility utilization, and a decrease in pharmacy expense associated with the transition to in-house pharmacy services. The decrease in cost per participant was partially offset by an annual increase in assisted living and permanent nursing facility unit cost, an increase in assisted living utilization, and an increase in inpatient unit cost.

Previous wording

Cost of care (excluding depreciation and amortization). Cost of care (excluding depreciation and amortization) expense was $75.9 million for the three months ended September 30, 2025, an increase of $12.5 million, or 19.7%, compared to $63.4 million for the three months ended September 30, 2024, due to an increase of $6.2 million, or 8.9%, in cost per participant coupled with an increase of $6.3 million, or 9.9%, in member months. The overall increase for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily driven by (i) a $4.5 million increase in salaries, wages and benefits associated with increased headcount and higher wage rates, (ii) $4.9 million in third party fees and shipping costs associated with in-house pharmacy services, and (iii) $2.1 million in fleet costs including contract transportation.

Current wording

Cost of care (excluding depreciation and amortization). Cost of care (excluding depreciation and amortization) expense was $74.9 million for the three months ended December 31, 2025, an increase of $10.8 million, or 16.9%, compared to $64.1 million for the three months ended December 31, 2024. This increase was driven by an increase of $5.8 million, or 8.3%, in cost per participant coupled with an increase of $5.1 million, or 7.9%, in member months. The overall increase of cost of care for the three months ended December 31, 2025 as compared to the three months ended December 31, 2024 was primarily driven by (i) a $2.0 million net increase in salaries, wages and benefits due to higher wage rates and cost associated with organizational restructure, partially offset by a reduction in headcount, (ii) $4.8 million in third party fees and shipping costs associated with in-house pharmacy services, and (iii) $3.2 million in fleet costs including contract transportation.

Previous wording

Sales and marketing. Sales and marketing expenses were $7.6 million for the three months ended September 30, 2025, an increase of $1.1 million, or 17.1%, compared to $6.5 million for the three months ended September 30, 2024, primarily due to increased headcount and wage rates to support growth coupled with increased marketing spend.

Current wording

Sales and marketing expenses were $15.7 million for the six months ended December 31, 2025, an increase of $1.5 million, or 10.5%, compared to $14.2 million for the six months ended December 31, 2024 primarily due to increased headcount, wage rates, and marketing spend to support growth.

Previous wording

Corporate, general and administrative. Corporate, general and administrative expenses were $30.3 million for the three months ended September 30, 2025, an increase of $2.7 million, or 9.9%, compared to $27.5 million for the three months ended September 30, 2024. This increase for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily due to (i) $1.4 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) $1.1 million in software license fees, and (iii) $1.1 million in contract and professional services. These increases were partially offset by a $1.4 million decrease in legal fees.

Current wording

Corporate, general and administrative expenses were $56.9 million for the six months ended December 31, 2025, an increase of $1.2 million, or 2.7%, compared to $55.6 million for the six months ended December 31, 2024. This increase for the six months ended December 31, 2025 as compared to the six months ended December 31, 2024 was primarily due to (i) $1.5 million net increase in employee compensation and benefits as the result of an organizational restructure and executive severance and an increase in headcount and wage rates, partially offset by lower variable compensation associated with the restructure (ii) $1.5 million increase in contract services, and (iii) $1.4 million increase in software license fees. These increases in cost were partially offset by (i) $2.4 million reduction in legal fees and (ii) $0.6 million reduction in consulting fees.

Previous wording

Loss on assets held for sale. On September 11, 2025, the Company closed on the sale of SH1 and the adjacent vacant land and recorded an additional loss on assets held for sale of $0.1 million.

Current wording

Impairments and loss on assets held for sale. On September 11, 2025, the Company closed on the sale of SH1 and the adjacent vacant land and recorded an additional loss on assets held for sale of $0.1 million.

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 $1.3 million for the three months ended September 30, 2025, compared to $1.2 million for the three months ended September 30, 2024. The increase in interest expense, net 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 September 30, 2025. Interest expense of $1.8 million was partially offset by interest income of $0.7 million during the three months ended September 30, 2024.

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.

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. The increase in other income was due to dividends received of $0.5 million and a gain on disposal of assets of $0.4 million for the three months ended September 30, 2025, compared to dividends received of $0.6 million for the three months ended September 30, 2024.

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.

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"), InnovAge Sacramento, and InnovAge Orlando have elected to be taxed as partnerships, and no provision (benefit) for income taxes for SH1, InnovAge Sacramento, or InnovAge Orlando is included in the condensed consolidated financial statements. The Company entered into a joint venture called InnovAge Florida PACE II – Tampa on August 15, 2025 and its members elected to be taxed as a partnership. No provision (benefit) for income taxes for InnovAge Tampa is included in the condensed consolidated financial statements for activity occurring from joint venture formation date through the balance of the fiscal year. Further, on September 11, 2025, the Company sold its partnership interest in SH1.

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"), InnovAge Sacramento, and InnovAge Orlando have elected to be taxed as partnerships, and no provision (benefit) for income taxes for InnovAge Sacramento or InnovAge Orlando is included in the condensed consolidated financial statements. In addition, no provision (benefit) for income taxes for SH1 is included in the condensed consolidated financial statements through the date of the Company's sale of its partnership interest in SH1 on September 11, 2025. The Company entered into a joint venture called InnovAge Florida PACE II – Tampa on August 15, 2025 and its members elected to be taxed as a partnership. No provision (benefit) for income taxes for InnovAge Tampa 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 September 30, 2025 and 2024, we reported an income tax expense of $0.2 million and $0.4 million, respectively. The decrease of $0.2 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024, was primarily due to (i) our pretax book income recognized during the three months ended September 30, 2025, as compared to pretax book loss recognized during the three months ended September 30, 2024, (ii) a discrete item to account for the impact of the OBBBA, and (iii) the change in our valuation allowance.

Current wording

During the three months ended December 31, 2025 and 2024, we reported an income tax expense of $0.7 million and $0.03 million, respectively. The increase of $0.7 million for the three months ended December 31, 2025 compared to the three months ended December 31, 2024, was primarily due to (i) our pretax book income recognized during the three months ended December 31, 2025, as compared to pretax book loss recognized during the three months ended December 31, 2024, (ii) a discrete item to account for the impact of the OBBBA, 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 $51.4 million and $34.5 million for the three months ended September 30, 2025 and 2024, respectively. The increase in Center-level Contribution Margin for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to a 15.1% increase in total revenue, offset by a 8.3% 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 income (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 $104.2 million and $71.6 million for the six months ended December 31, 2025 and 2024, respectively. The increase in Center-level Contribution Margin for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 was primarily due to a 14.7% increase in total revenue, offset by a 8.7% 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 income (loss) before income taxes, the most directly comparable GAAP measure, for each of the periods is as follows:

Previous wording

(a)Center-level Contribution Margin from a segment below the quantitative thresholds is attributable to the Senior Housing operating segment of the Company. This segment has never met any of the quantitative thresholds for determining reportable segments.

Current wording

(a)Center-level Contribution Margin from a segment below the quantitative thresholds is attributable to the Senior Housing operating segment of the Company. This segment has never met any of the quantitative thresholds for determining reportable segments. As of September 11, 2025, the Company no longer operates Senior Housing as the remaining Senior Housing assets were sold.

Previous wording

We define Adjusted EBITDA as net income (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, loss on assets held for sale and gain on sale of assets. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue. For the three months ended September 30, 2025 and 2024, net income (loss) was $7.7 million and $(5.7) million, respectively, representing a year-over-year decrease of (234.3)%. For the three months ended September 30, 2025, net income margin was 3.2%, as compared to net loss margin of 2.8% for the three months ended September 30, 2024. 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.

Current wording

We define Adjusted EBITDA as net income (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, loss on assets held for sale and gain on sale of assets. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue. For the six months ended December 31, 2025 and 2024, net income (loss) was $19.5 million and $(19.2) million, respectively, representing a year-over-year increase of 201.4%. For the six months ended December 31, 2025, net income margin was 4.1%, as compared to net loss margin of 4.6% for the six months ended December 31, 2024. 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 income (loss) and net income (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 income (loss) and net income (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 three months ended September 30, 2024 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 income (loss) and net income (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 income (loss) and net income (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, 2024 has been recast to conform to the current presentation.

Previous wording

(c)Reflects charges related to M&A diligence, transaction and integrations.

Current wording

(c)Reflects charges related to M&A diligence, transactions and integrations.

Previous 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 September 30, 2025, this consists of costs related to organizational restructure and executive severance. For the three months ended September 30, 2024, this includes (i) $0.4 million of organizational restructure and (ii) $0.2 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 December 31, 2025, this consists of costs related to organizational restructure. For the six months ended December 31, 2025, this consists of costs related to organizational restructure and executive severance. 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.

Previous wording

(e)Reflects additional loss related to the Company's sale of its managing member interest in SH1 and the adjacent vacant land.

Current wording

(e)For the six months ended December 31, 2025, reflects additional loss related to the Company's sale of its managing member interest in SH1 and the adjacent vacant land. For the three and six months ended December 31, 2024, 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.

Previous wording

(f)Reflects gain on sale of center equipment that was originally purchased for the center in Louisville, Kentucky.

Current wording

(f)For the six months ended December 31, 2025, reflects gain on sale of center equipment that was originally purchased for the center in Louisville, Kentucky.

Previous wording

We have financed our operations principally through cash flows from operations and through borrowings under our credit facilities. As of September 30, 2025, we had cash and cash equivalents of $67.1 million, an increase of $3.0 million from June 30, 2025, and short-term investments of $42.3 million, an increase of $0.5 million from June 30, 2025. The increase 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.

Current wording

We have financed our operations principally through cash flows from operations and through borrowings under our credit facilities. As of December 31, 2025, we had cash and cash equivalents of $83.2 million, an increase of $19.1 million from June 30, 2025, and short-term investments of $42.8 million, an increase of $1.0 million from June 30, 2025. The increase in cash and cash equivalents and short-term investments was primarily due to timing of cash receipts for services provided. 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

On March 8, 2021, the Company entered into a credit agreement (as amended, the "Credit Agreement") that consisted of a senior secured term loan (the “Term Loan Facility”) of $75.0 million principal amount and a revolving credit facility (the “Revolving Credit Facility”) of $100.0 million maximum borrowing capacity. On August 8, 2025, the Company entered into Amendment No. 2 to the Credit Agreement. Following entry into Amendment No. 2 to the Credit Agreement, the Term Loan Facility was replaced by a $50.7 million term loan (the "Term Loan A Facility"), the commitments with respect to the Revolving Credit Facility were renewed, and the maturity dates for both the Term Loan A Facility and the Revolving Credit Facility were extended. As of September 30, 2025, we had $60.1 million of debt outstanding, which includes $50.7 million under our Term Loan A Facility and $9.4 million draw on our Revolving Credit Facility, each of which matures on August 8, 2028.

Current wording

On March 8, 2021, the Company entered into a credit agreement (as amended, the "Credit Agreement") that consisted of a senior secured term loan (the “Term Loan Facility”) of $75.0 million principal amount and a revolving credit facility (the “Revolving Credit Facility”) of $100.0 million maximum borrowing capacity. On August 8, 2025, the Company entered into Amendment No. 2 to the Credit Agreement. Following entry into Amendment No. 2 to the Credit Agreement, the Term Loan Facility was replaced by a $50.7 million term loan (the "Term Loan A Facility"), the commitments with respect to the Revolving Credit Facility were renewed, and the maturity dates for both the Term Loan A Facility and the Revolving Credit Facility were extended. As of December 31, 2025, we had $59.4 million of debt outstanding, which includes $50.1 million under our Term Loan A Facility and $9.4 million draw on our Revolving Credit Facility, each of which matures on August 8, 2028.

Previous wording

As of September 30, 2025, we had future minimum operating lease payments under non-cancellable leases through the year 2039 of $36.4 million. We also had non-cancellable finance lease agreements with third parties through the year 2029 with future minimum payments of $15.4 million. For additional information, see Note 7, “Leases”, Note 8, “Long-Term Debt”, and Note 9, “Commitments and Contingencies” to our condensed consolidated financial statements.

Current wording

As of December 31, 2025, we had future minimum operating lease payments under non-cancellable leases through the year 2039 of $33.3 million. We also had non-cancellable finance lease agreements with third parties through the year 2030 with future minimum payments of $12.3 million. For additional information, see Note 7, “Leases”, Note 8, “Long-Term Debt”, and Note 9, “Commitments and Contingencies” to our condensed consolidated financial statements.

Previous wording

Outstanding principal amounts under the Credit Agreement accrue interest at a variable interest rate. As of September 30, 2025, the interest rate on the Term Loan A Facility was 6.63%. Under the terms of the Credit Agreement, the Revolving Credit Facility fee accrues at 0.25% of the average daily unused amount and is paid quarterly. As of September 30, 2025, we had $9.4 million of borrowings outstanding, $5.2 million of letters of credit issued, and $85.4 million of remaining borrowing capacity under the Revolving Credit Facility.

Current wording

Outstanding principal amounts under the Credit Agreement accrue interest at a variable interest rate. As of December 31, 2025, the interest rate on the Term Loan A Facility was 6.24%. Under the terms of the Credit Agreement, the Revolving Credit Facility fee accrues at 0.50% of the average daily unused amount and is paid quarterly. As of

Previous wording

Other than with respect to Board-approved share repurchase programs, if any, we currently intend to retain substantially all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness, and do not anticipate paying any cash dividends in the foreseeable future.

Current wording

We currently intend to retain substantially all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness, and do not anticipate paying any cash dividends in the foreseeable future.

Previous wording

Our condensed consolidated statements of cash flows for the three months ended September 30, 2025 and 2024 are summarized as follows:

Current wording

Our condensed consolidated statements of cash flows for the six months ended December 31, 2025 and 2024 are summarized as follows:

Previous wording

Operating Activities. The change in net cash provided by (used in) operating activities for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was driven primarily by $13.2 million increase in net income, net of non-cash adjustments.

Current wording

Operating Activities. The change in net cash provided by (used in) operating activities for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 was driven primarily by $29.0 million increase in net income, net of non-cash adjustments.

Previous wording

Investing Activities. The change in net cash used in investing activities for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 was primarily due to $3.7 million of net proceeds from the sale of assets held for sale, partially offset by a $1.9 million increase in purchases of property and equipment to support growth.

Current wording

Investing Activities. The change in net cash used in investing activities for the six months ended December 31, 2025 compared to the six months ended December 31, 2024 was primarily due to a $2.9 million increase in purchases of property and equipment to support growth. In addition, the prior year included $6.3 million in proceeds from the sale of short-term investments that did not reoccur in the current year, partially offset by $3.7 million in proceeds from assets held for sale that occurred in the current year.