UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~December 31, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-40159

InnovAge Holding Corp.

(Exact name of registrant as specified in its charter)


Delaware			81-0710819
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification Number)

8950 E. Lowry Boulevard Denver, CO (Address of Principal Executive Offices)			80230 (Zip Code)

(844) 803-8745

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	INNV	The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~May 8, 2023,~~February 5, 2024, there were ~~135,630,167~~135,899,435 of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page

Part I	Financial Information

Item 1.	Financial Statements (Unaudited)	5

	Condensed Consolidated Balance Sheets as of ~~March~~December 31 , 2023 (Unaudited) and June 30, ~~2022~~2023	5

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~March~~December 31 , 2023 and 2022 (Unaudited)	6

	Condensed Consolidated Statements of Stockholders’ Equity for the three and ~~nine~~six months ended ~~March~~December 31 , 2023 and 2022 (Unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~March~~December 31 , 2023 and 2022 (Unaudited)	9

	Notes to Condensed Consolidated Financial Statements as of ~~March~~December 31 ~~31, 202~~3 , 2023 (Unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2829

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4243

Item 4.	Controls and Procedures	4244

Part II	Other Information	4445

Item 1.	Legal Proceedings	4445

Item 1A.	Risk Factors	4445

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4445

Item 3.	Defaults Upon Senior Securities	4445

Item 4.	Mine Safety Disclosures	4445

Item 5.	Other Information	4445

Item 6.	Exhibits	4546

Exhibit Index		4546

Signatures		4647

Table of Contents

InnovAge Holding Corp. and Subsidiaries

Quarterly Report on Form 10-Q

For the quarterly period ended ~~March~~December 31, 2023

Cautionary Note on Forward-Looking Statements

Throughout this Quarterly Report on Form 10-Q, we make “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “anticipate,” “target,” “should,” “could,” “potential,” “opportunity,” “goal” or similar terminology. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q are forward-looking statements. Forward-looking statements ~~may be identified by the fact that they do not relate strictly~~give our current expectations and projections relating to ~~historical or current facts~~our financial condition, results of operations, plans, objectives, future performance and ~~may include statements about our expectations~~business, including with respect to current audits and legal proceedings and actions, relationships and discussions with regulatory agencies, our expectations with respect to correcting deficiencies raised in audits and other processes, and our expectations to increase the number of participants we serve, to grow enrollment and capacity within existing centers, to build or open de novo centers, and other similar statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally located ~~in the material set forth~~ under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in Part I, Item 2, and “Risk Factors,” included in Part II, Item 1A, but may be found in other locations as well. These statements are based upon management’s current expectations, projections, assumptions and estimates and are not guarantees of timing, future results or performance. Therefore, you should not rely on any of these forward-looking statements as predictions of future events. Actual results may differ materially from those contemplated in these statements due to a variety of risks and uncertainties and other factors, including, among other things:

•the viability of our growth strategy, including our ability to obtain licenses to open our de novo centers in Downey and Bakersfield, California;

•our ability to identify and successfully complete and integrate acquisitions;

•our ability to attract new participants and retain existing participants and grow our revenue throughout our existing centers;

•the results of periodic inspections, reviews, audits and investigations under the federal and state government programs, ~~including~~such as the audit of our Sacramento, California center and the targeted medical review of our San Bernardino, California center, and our ability to sufficiently cure any new and recurring deficiencies identified by the respective federal and state government programs;

•the adverse impact of inspections, reviews, audits, investigations, legal proceedings, enforcement actions and litigation, including the current civil investigative demands initiated by federal and state agencies, as well as the litigation and other proceedings initiated by, or on behalf, of our stockholders;

•the ~~effects of a pandemic, epidemic or outbreak of an infectious disease, including the ongoing effects of COVID-19;~~

•~~our ability to enroll or attract new participants and grow our revenue throughout our existing centers;~~

•~~our ability to establish a presence in new geographic markets, especially as a result of the actions taken by certain states and us in light of our audit processes;~~

•~~the~~ risk that the cost of providing services will exceed our compensation under the Program of All Inclusive Care for the Elderly (“PACE”);

•our increased costs and expenditures in the future and our inability to execute or realize the benefits of our clinical value initiatives;

•the impact on our business from ongoing macroeconomic related challenges, including labor shortages and inflation;

•the dependence of our revenues and operations upon a limited number of government payors;

•changes in the rules governing the Medicare, Medicaid or PACE programs or applicable licensure requirements, including the effects of the expiration of the national emergency and public health emergency declarations related to the COVID-19 pandemic;

•the risk that our submissions to government payors may contain inaccurate or unsupportable information, including regarding risk adjustment scores of participants;

•the ~~viability of our business strategy and our ability to realize expected results;~~

•~~the~~ impact on our business of renegotiation, non-renewal or termination of capitation agreements with government payors;

•the difficulty to predict our future results, which could cause such results to fall below any guidance we provide;

•the impact of state and federal efforts to reduce healthcare spending;

•the ~~impact on our business from~~effects of a pandemic, epidemic or outbreak of an ~~economic downturn or recession;~~infectious disease, such as COVID-19;

•our dependence on our senior management team and other key employees;

•the ~~effect of sustained inflation on our business;~~

•~~the~~ impact of failures by our suppliers ~~sustained material price increases on supplies~~ or limitations on our ability to access new technology or medical products;

•~~the effect of our relatively limited operating history as a for-profit company on investors’ ability to evaluate our current business and future prospects;~~

•the concentration of our presence in Colorado;

•our ability to manage our operations effectively, execute our business plan, maintain effective levels of service and participant satisfaction and adequately address competitive challenges;

•our ability to compete in the healthcare industry;

•our ability to establish a presence in new geographic markets;

•the impact of competition for physicians and other clinical personnel and related increases in our labor costs;

Table of Contents

•labor relations matters, including unionization efforts;

•the impact on our business of security breaches, loss of data or other disruptions causing the compromise of sensitive information or preventing us from accessing critical information;

•our ability to effectively invest in, implement improvements to and properly maintain the uninterrupted operation and data integrity of our information technology and other business systems;

•our ability to accurately estimate incurred but not reported medical expense or the risk scores of our participants;

•risks associated with our use of “open-source” software;

•the impact on our business of the termination of our leases, increases in rent or inability to renew or extend leases;

•~~our ability to maintain our corporate culture;~~

•~~the impact of negative publicity regarding the managed healthcare industry;~~

•the impact of weather and other factors beyond our control;

•the effect of our relatively limited operating history as a for-profit company on investors' ability to evaluate our current business and future prospects;

•our ability to adhere to complex and changing government laws and regulations in the healthcare industry, including U.S. Healthcare reform, the regulation of the corporate practice of medicine and the Health Information Technology for Economic and Clinical Health Act of 2009 (the “HITECH Act”), and their implementing regulations (collectively, “HIPAA”), the California Consumer Privacy Act (“CCPA”) and other privacy laws and regulations in the healthcare industry;

•our status as a “controlled company”;

•our ability to maintain effective internal controls over financial reporting and other enhanced requirements of being a public company;

•our ability to maintain and enhance our reputation and brand recognition;

•the impact on our business of disruptions in our disaster recovery systems or business continuity planning;

•~~changes in accounting principles~~impact of negative publicity regarding the managed healthcare industry; and ~~guidance, resulting in unfavorable accounting charges or effects; and~~

•other factors disclosed in the section entitled “Risk Factors” in our Annual Report for the year ended June 30, ~~2022~~2023 filed with the Securities and Exchange Commission (the “SEC”) on September ~~13, 2022,~~12, 2023, and our subsequent filings with the SEC.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other public communications and filings with the SEC. You should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of these risks and uncertainties.

We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Unless otherwise specified or unless the context requires otherwise, all references in this Quarterly Report on Form 10-Q to “InnovAge,” “the Company,” “we,” “us,” and “our,” or similar references, refer to InnovAge Holding Corp. and our consolidated subsidiaries.

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

INNOVAGE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)


		March 31, 2023		June 30, 2022
	December 31, 2023						December 31, 2023	June 30, 2023
Assets	Assets
Current Assets	Current Assets
Current Assets
Current Assets
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	121,706	$	184,429
Short-term investments	Short-term investments	45,847		—
Restricted cash	Restricted cash	16		17
Accounts receivable, net of allowance ($3,936 – March 31, 2023 and $3,403 – June 30, 2022)		34,197		35,907
Accounts receivable, net of allowance ($5,134 – December 31, 2023 and $4,161 – June 30, 2023)
Prepaid expenses	Prepaid expenses	13,924		13,842
Income tax receivable	Income tax receivable	254		6,761
Total current assets	Total current assets	215,944		240,956
Noncurrent Assets	Noncurrent Assets					Noncurrent Assets
Property and equipment, net	Property and equipment, net	192,911		176,260
Operating lease assets	Operating lease assets	21,906		—
Investments	Investments	5,493		5,493
Deposits and other	Deposits and other	3,573		2,812
Goodwill	Goodwill	124,217		124,217
Other intangible assets, net	Other intangible assets, net	5,363		5,858
Total noncurrent assets	Total noncurrent assets	353,463		314,640
Total assets	Total assets	$	569,407	$	555,596
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	48,198	$	50,562
Reported and estimated claims	Reported and estimated claims	39,095		38,454
Due to Medicaid and Medicare	Due to Medicaid and Medicare	11,001		9,130
Income tax payable	Income tax payable	1,220		—
Current portion of long-term debt	Current portion of long-term debt	3,795		3,793
Current portion of finance lease obligations	Current portion of finance lease obligations	4,946		3,368
Current portion of operating lease obligations	Current portion of operating lease obligations	3,402		—
Deferred revenue	Deferred revenue	26,032		—
Total current liabilities	Total current liabilities	137,689		105,307
Noncurrent Liabilities	Noncurrent Liabilities					Noncurrent Liabilities
Deferred tax liability, net	Deferred tax liability, net	5,714		17,761
Finance lease obligations	Finance lease obligations	13,381		9,440
Operating lease obligations	Operating lease obligations	20,110		—
Other noncurrent liabilities	Other noncurrent liabilities	1,183		1,134
Long-term debt, net of debt issuance costs	Long-term debt, net of debt issuance costs	65,687		68,210
Total liabilities	Total liabilities	243,764		201,852
Commitments and Contingencies (See Note 9)	Commitments and Contingencies (See Note 9)					Commitments and Contingencies (See Note 9)
Redeemable Noncontrolling Interests (See Note 4)	Redeemable Noncontrolling Interests (See Note 4)	13,461		15,278
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Common stock, $0.001 par value; 500,000,000 authorized as of March 31, 2023 and June 30, 2022; 135,602,464 and 135,532,811 issued shares as of March 31, 2023 and June 30, 2022, respectively		136		136
Common stock, $0.001 par value; 500,000,000 authorized as of December 31, 2023 and June 30, 2023; 135,893,070 and 135,639,845 issued shares as of December 31, 2023 and June 30, 2023, respectively
Additional paid-in capital	Additional paid-in capital	330,955		327,499
Retained earnings (deficit)		(24,767)		4,729
Retained deficit
Total InnovAge Holding Corp.	Total InnovAge Holding Corp.	306,324		332,364
Noncontrolling interests	Noncontrolling interests	5,858		6,102
Total stockholders’ equity	Total stockholders’ equity	312,182		338,466
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	569,407	$	555,596

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INNOVAGE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except number of shares and per share data)

(Unaudited)


		Three Months Ended March 31,				Nine Months Ended March 31,
		2023		2022		2023		2022
	Three Months Ended December 31,														Three Months Ended December 31,						Six Months Ended December 31,
	2023											2023				2022			2023				2022
Revenues	Revenues
Capitation revenue
Capitation revenue
Capitation revenue	Capitation revenue	$	172,196	$	176,988	$	510,268	$	524,507
Other service revenue	Other service revenue	343		371		945		1,273
Total revenues	Total revenues	172,539		177,359		511,213		525,780
Expenses	Expenses
External provider costs
External provider costs
External provider costs	External provider costs	89,805		103,254		279,550		284,299
Cost of care, excluding depreciation and amortization	Cost of care, excluding depreciation and amortization	53,949		46,102		158,881		129,740
Sales and marketing	Sales and marketing	5,314		6,144		13,502		19,117
Corporate, general and administrative	Corporate, general and administrative	27,648		24,682		86,646		74,248
Depreciation and amortization	Depreciation and amortization	3,992		3,850		11,087		10,435
Total expenses	Total expenses	180,708		184,032		549,666		517,839
Operating Income (Loss)		(8,169)		(6,673)		(38,453)		7,941
Operating Loss

Other Income (Expense)	Other Income (Expense)
Other Income (Expense)
Other Income (Expense)
Interest expense, net	Interest expense, net	(405)		(709)		(1,231)		(1,930)
Other income (expense)		(101)		108		380		(358)
Interest expense, net
Interest expense, net
Other income
Other expense
Total other expense	Total other expense	(506)		(601)		(851)		(2,288)
Income (Loss) Before Income Taxes		(8,675)		(7,274)		(39,304)		5,653
Loss Before Income Taxes
Provision (Benefit) for Income Taxes	Provision (Benefit) for Income Taxes	(1,365)		(4,116)		(7,747)		81
Net Income (Loss)		(7,310)		(3,158)		(31,557)		5,572
Net Loss
Less: net loss attributable to noncontrolling interests	Less: net loss attributable to noncontrolling interests	(680)		(337)		(2,061)		(616)
Net Income (Loss) Attributable to InnovAge Holding Corp.		$	(6,630)	$	(2,821)	$	(29,496)	$	6,188
Net Loss Attributable to InnovAge Holding Corp.

Weighted-average number of common shares outstanding - basic
Weighted-average number of common shares outstanding - basic
Weighted-average number of common shares outstanding - basic	Weighted-average number of common shares outstanding - basic	135,601,327		135,516,608		135,581,971		135,516,544		135,887,613			135,578,888				135,839,007			135,572,503
Weighted-average number of common shares outstanding - diluted	Weighted-average number of common shares outstanding - diluted	135,601,327		135,516,608		135,581,971		135,530,793		Weighted-average number of common shares outstanding - diluted	135,887,613			135,578,888				135,839,007				135,572,503

Net income (loss) per share - basic		$	(0.05)	$	(0.02)	$	(0.22)	$	0.05
Net income (loss) per share - diluted		$	(0.05)	$	(0.02)	$	(0.22)	$	0.05
Net loss per share - basic
Net loss per share - basic
Net loss per share - basic
Net loss per share - diluted

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INNOVAGE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

For the Three Months Ended March 31, 2023
Capital Stock Additional
Paid-in
Capital Retained
Earnings
(Deficit) Noncontrolling
Interests Total
Permanent
Stockholders' Equity Redeemable
Noncontrolling Interests
(Temporary Equity) Net Income
(Loss)
Shares Amount
Balances, December 31, 2022 135,596,225 $ 136 $ 329,777 $ (18,137) $ 5,945 $ 317,721 14,054
Stock-based compensation 6,239 — 1,178 — — 1,178 —
Adjustments to redemption value — — — — — — —
Net loss — — — (6,630) (87) (6,717) (593) (7,310)
Balances, March 31, 2023 135,602,464 $ 136 $ 330,955 $ (24,767) $ 5,858 $ 312,182 $ 13,461 $
For the Nine Months Ended March 31, 2023
Capital Stock Additional
Paid-in
Capital Retained
Earnings
(Deficit) Noncontrolling
Interests Total
Permanent
Stockholders' Equity Redeemable
Noncontrolling Interests
(Temporary Equity) Net Income
(Loss)
Shares Amount
Balances, June 30, 2022 135,532,811 $ 136 $ 327,499 $ 4,729 $ 6,102 $ 338,466 15,278
Stock-based compensation 69,653 — 3,456 — — 3,456 —
Adjustments to redemption value — — — — — — —
Net loss — — — (29,496) (244) (29,740) (1,817) (31,557)
Balances, March 31, 2023 135,602,464 $ 136 $ 330,955 $ (24,767) $ 5,858 $ 312,182 $ 13,461 $


	For the Three Months Ended December 31, 2023
	Capital Stock			Additional Paid-in Capital		Retained Earnings (Deficit)		Noncontrolling Interests		Total Permanent Stockholders' Equity		Redeemable Noncontrolling Interests (Temporary Equity)		Net Income (Loss)
	Shares	Amount
Balances, September 30, 2023	135,884,840	$	136	$	333,316	$	(46,248)	$	5,705	$	292,909	12,138
Stock-based compensation	11,552	—		1,766		—		—		1,766		—
Tax withholding related to net share settlements of stock-based compensation awards	(3,322)	—		(20)		—		—		(20)		—
Net loss	—	—		—		(3,447)		(67)		(3,514)		(307)		(3,821)
Balances, December 31, 2023	135,893,070	$	136	$	335,062	$	(49,695)	$	5,638	$	291,141	$	11,831

	For the Six Months Ended December 31, 2023
	Capital Stock			Additional Paid-in Capital		Retained Earnings (Deficit)		Noncontrolling Interests		Total Permanent Stockholders' Equity		Redeemable Noncontrolling Interests (Temporary Equity)		Net Income (Loss)
	Shares	Amount
Balances, June 30, 2023	135,639,845	$	136	$	332,107	$	(35,944)	$	5,793	$	302,092	12,708
Stock-based compensation	359,401	—		3,589		—		—		3,589		—
Tax withholding related to net share settlements of stock-based compensation awards	(106,176)	—		(634)		—		—		(634)		—
Net loss	—	—		—		(13,751)		(155)		(13,906)		(877)		(14,783)
Balances, December 31, 2023	135,893,070	$	136	$	335,062	$	(49,695)	$	5,638	$	291,141	$	11,831

Table of Contents

For the Three Months Ended March 31, 2022
Capital Stock Additional
Paid-in
Capital Retained
Earnings
(Deficit) Noncontrolling
Interests Total
Permanent
Stockholders' Equity Redeemable
Noncontrolling Interests
(Temporary Equity) Net Income
(Loss)
Shares Amount
Balances, December 31, 2021 135,516,513 $ 136 $ 325,501 $ 17,695 $ 6,254 $ 349,586 18,850
Stock-based compensation 8,493 — 845 — — 845 —
Adjustments to redemption value — — — 2,563 — 2,563 (2,563)
Net income (loss) — — — (2,821) (47) (2,868) (290) (3,158)
Balances, March 31, 2022 135,525,006 $ 136 $ 326,346 $ 17,437 $ 6,207 $ 350,126 $ 15,996 $
For the Nine Months Ended March 31, 2022
Capital Stock Additional
Paid-in
Capital Retained
Earnings
(Deficit) Noncontrolling
Interests Total
Permanent
Stockholders' Equity Redeemable
Noncontrolling Interests
(Temporary Equity) Net Income
(Loss)
Shares Amount
Balances, June 30, 2021 135,516,513 $ 136 $ 323,760 $ 10,663 $ 6,420 $ 340,979 16,986
Stock-based compensation 8,493 — 2,586 — — 2,586 —
Adjustments to redemption value — — — 586 — 586 (586)
Net income (loss) — — — 6,188 (213) 5,975 (403) 5,572
Balances, March 31, 2022 135,525,006 $ 136 $ 326,346 $ 17,437 $ 6,207 $ 350,126 $ 15,996 $




	For the Three Months Ended December 31, 2022
	Capital Stock			Additional Paid-in Capital		Retained Earnings (Deficit)		Noncontrolling Interests		Total Permanent Stockholders' Equity		Redeemable Noncontrolling Interests (Temporary Equity)		Net Income (Loss)
	Shares	Amount
Balances, September 30, 2022	135,570,078	$	136	$	328,708	$	(8,344)	$	6,020	$	326,520	14,734
Stock-based compensation	26,147	—		1,069		—		—		1,069		—
Adjustments to redemption value	—	—		—		—		—		—		—
Net loss	—	—		—		(9,793)		(75)		(9,868)		(680)		(10,547)
Balances, December 31, 2022	135,596,225	$	136	$	329,777	$	(18,137)	$	5,945	$	317,721	$	14,054	$

	For the Six Months Ended December 31, 2022
	Capital Stock			Additional Paid-in Capital		Retained Earnings (Deficit)		Noncontrolling Interests		Total Permanent Stockholders' Equity		Redeemable Noncontrolling Interests (Temporary Equity)		Net Income (Loss)
	Shares	Amount
Balances, June 30, 2022	135,532,811	$	136	$	327,499	$	4,729	$	6,102	$	338,466	15,278
Stock-based compensation	63,414	—		2,278		—		—		2,278		—
Adjustments to redemption value	—	—		—		—		—		—		—
Net loss	—	—		—		(22,866)		(157)		(23,023)		(1,224)		(24,247)
Balances, December 31, 2022	135,596,225	$	136	$	329,777	$	(18,137)	$	5,945	$	317,721	$	14,054	$

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INNOVAGE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


		For the Nine Months Ended March 31,
		2023		2022
	For the Six Months Ended December 31,							For the Six Months Ended December 31,
	2023						2023		2022
Operating Activities	Operating Activities
Net income (loss)		$	(31,557)	$	5,572
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
(Gain) loss on disposal of assets		482		358
Net loss
Net loss
Net loss
Adjustments to reconcile net loss to net cash used in operating activities						Adjustments to reconcile net loss to net cash used in operating activities
Gain on disposal of assets
Provision for uncollectible accounts	Provision for uncollectible accounts	2,319		4,834
Depreciation and amortization	Depreciation and amortization	11,087		10,435
Operating lease rentals	Operating lease rentals	3,500		—
Amortization of deferred financing costs	Amortization of deferred financing costs	322		322
Stock-based compensation	Stock-based compensation	3,456		2,586
Loss on minority equity interest investment
Deferred income taxes	Deferred income taxes	(12,046)		81
Other	Other	(726)		—
Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
Accounts receivable, net	Accounts receivable, net	(609)		(4,157)
Prepaid expenses	Prepaid expenses	(81)		(4,323)
Income tax receivable	Income tax receivable	7,727		(60)
Deposits and other	Deposits and other	(836)		(1,501)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	25,161		4,705
Reported and estimated claims	Reported and estimated claims	641		2,778
Due to Medicaid and Medicare	Due to Medicaid and Medicare	1,870		2,429
Operating lease liabilities	Operating lease liabilities	(3,625)		—
Net cash provided (used) by operating activities		7,085		24,059
Deferred revenue
Net cash used by operating activities
Investing Activities	Investing Activities					Investing Activities
Purchases of property and equipment	Purchases of property and equipment	(19,329)		(20,141)
Purchases of short-term investments	Purchases of short-term investments	(45,000)		—
Purchases of intangible assets		—		(1,437)
Purchase of cost method investment		—		(2,000)
Proceeds from sale of short-term investments
Acquisition of business
Net cash used in investing activities	Net cash used in investing activities	$	(64,329)	$	(23,578)
Financing Activities	Financing Activities
Payments for finance lease obligations	Payments for finance lease obligations	(2,637)		(1,829)
Payments for finance lease obligations
Payments for finance lease obligations
Principal payments on long-term debt	Principal payments on long-term debt	(2,843)		(2,841)
Taxes paid related to net share settlements of stock-based compensation awards
Net cash used in financing activities	Net cash used in financing activities	(5,480)		(4,670)

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS & RESTRICTED CASH		(62,724)		(4,189)
DECREASE IN CASH, CASH EQUIVALENTS & RESTRICTED CASH
DECREASE IN CASH, CASH EQUIVALENTS & RESTRICTED CASH
DECREASE IN CASH, CASH EQUIVALENTS & RESTRICTED CASH
CASH, CASH EQUIVALENTS & RESTRICTED CASH, BEGINNING OF PERIOD	CASH, CASH EQUIVALENTS & RESTRICTED CASH, BEGINNING OF PERIOD	184,446		203,700
CASH, CASH EQUIVALENTS & RESTRICTED CASH, END OF PERIOD	CASH, CASH EQUIVALENTS & RESTRICTED CASH, END OF PERIOD	$	121,722	$	199,511

Supplemental Cash Flows Information
Supplemental Cash Flows Information
Supplemental Cash Flows Information	Supplemental Cash Flows Information
Interest paid	Interest paid	$	2,826	$	1,452
Income taxes paid	Income taxes paid	$	13	$	84
Property and equipment included in accounts payable	Property and equipment included in accounts payable	$	1,811	$	4,577
Property and equipment purchased under finance leases	Property and equipment purchased under finance leases	$	8,157	$	8,057

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

INNOVAGE HOLDING CORP. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1: Business

InnovAge Holding Corp. and its subsidiaries (the "Company") are headquartered in Denver, Colorado. The Company ~~manages, and in many cases directly provides,~~fulfills a broad range of medical and ancillary services for seniors in need of care and support to safely live independently in their communities, including in-center services such as primary care, physical therapy, occupational therapy, speech therapy, dental services, mental health and psychiatric services, meals, and activities; transportation to the Program of All-Inclusive Care for the Elderly (“PACE”) center and third-party medical appointments; and care management. The Company manages its business as one reportable segment, PACE.

As of ~~March~~December 31, 2023, the Company served approximately ~~6,310~~6,780 PACE participants, making it the largest PACE provider in the United States of America (the “U.S.”) based upon participants served, and ~~operates 17~~operated 18 PACE centers across California, Colorado, ~~California,~~ New Mexico, Pennsylvania and Virginia. ~~During the third quarter ended March 31, 2023, the Company consolidated its Germantown LIFE center with its Allegheny and Henry Avenue LIFE centers in Pennsylvania.~~

PACE is a fully-capitated managed care program, which serves the frail elderly, and predominantly dual-eligible, population in a community-based service model. We define dual-eligible seniors as individuals who are 55+ and qualify for benefits under both Medicare and Medicaid. InnovAge ~~is obligated to provide, and participants receive~~provides all needed healthcare services through an all-inclusive, coordinated model of care, and the Company is at risk for 100% of healthcare costs incurred with respect to the care of its participants. PACE programs receive capitation payments directly from Medicare Parts C and D, Medicaid, Veterans Affairs (“VA”), and private pay sources. Additionally, under the Medicare Prescription Drug Plan, the Centers for Medicare and Medicaid Services (“CMS”) share part of the risk for providing prescription medication to the Company’s participants.

The Company’s common stock is traded on the Nasdaq Stock Market LLC (“NASDAQ”) under the ticker symbol ~~“INNV.”~~“INNV”.

Note 2: Summary of Significant Accounting Policies

The Company described its significant accounting policies in Note 2, “Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in its Annual Report on Form 10-K for the year ended June 30, ~~2022~~2023 (“~~2022~~2023 10-K”). With the exception of Recently Adopted Accounting Pronouncements described below, there were no significant changes to those accounting policies during the ~~nine~~six months ended ~~March~~December 31, 2023.

Basis of Preparation and Principles of Consolidation

The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such regulations. These financial statements have been prepared on a basis consistent with the accounting principles applied for the fiscal year ended June 30, ~~2022.~~2023. In the opinion of management, all adjustments (consisting of all normal and recurring adjustments) considered necessary for a fair presentation have been included. The condensed consolidated financial statements include the accounts of ~~InnovAge,~~the Company, its wholly owned subsidiaries, variable interest entities (“VIEs”) for which it is the primary beneficiary and entities for which it has a controlling interest. All intercompany accounts and transactions have been eliminated in consolidation.

The Company does not have any components of comprehensive income and comprehensive income is equal to net ~~income (loss)~~loss reported in the statements of operations for all periods presented.

Table of Contents

Property and Equipment

Property and equipment were comprised of the following as of ~~March~~December 31, 2023 and June 30, ~~2022:~~2023:


dollars in thousands	dollars in thousands	Estimated Useful Lives		March 31, 2023		June 30, 2022		dollars in thousands	Estimated Useful Lives	December 31, 2023	June 30, 2023
Land	Land	N/A		$	11,969	$	11,980
Buildings and leasehold improvements	Buildings and leasehold improvements	10 - 40 years		124,231		122,076
Software	Software	3 - 5 years		26,594		16,264
Equipment and vehicles	Equipment and vehicles	3 - 7 years		57,035		47,546
Construction in progress	Construction in progress	N/A		40,467		35,479
				260,296		233,345
			275,706
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization			(67,385)		(57,085)
Total property and equipment, net	Total property and equipment, net			$	192,911	$	176,260

Depreciation of ~~$3.8 million was recorded during both the three months ended March 31, 2023 and 2022. Depreciation of $10.3~~$4.1 million and ~~$9.9~~$3.3 million was recorded during the ~~nine~~three months ended ~~March~~December 31, 2023 and 2022, respectively. Depreciation of $8.2 million and $6.5 million was recorded during the six months ended December 31, 2023 and December 31, 2022, respectively.

Recently Adopted Accounting Pronouncements

~~Leases~~

~~In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02~~ ~~Leases~~ (“ASU 2016-02”), which was intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, lessees are required to recognize a right-of-use (“ROU”) asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than 12 months. Additionally, this guidance requires enhanced disclosures to help investors and other financial statement users to better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. In June 2020, the FASB issued ASU 2020-05 ~~Revenue from contracts with customers (Topic 606) and leases (Topic 842) – Effective dates for certain entities~~ ~~which deferred the new lease standard effective date for the Company to interim periods beginning after December 15, 2021, with early adoption permitted.~~

We adopted the new standard on July 1, 2022 using the modified retrospective transition approach as permitted in ASU 2018-11. In accordance with this approach, the effective date of Topic 842 is also the application date of the new requirements, with prior comparative periods presented in the financial statements with the legacy requirements of ASC Topic 840, Leases. We elected the package of practical expedients which permits us not to reassess under the new lease standard our prior conclusions for lease identification and lease classification on expired or existing contracts and whether initial direct costs previously capitalized would qualify for capitalization under the new lease standard. We also elected to adopt the optional transition method which allows an entity to recognize, if necessary, a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company did not elect the practical expedient to use hindsight in determining the lease term and in assessing impairment conclusions on the ROU assets. Comparative periods presented in the financial statements continue to be presented in accordance with GAAP related to leases prior to transitioning to the new lease standard. The adoption of Topic 842 resulted in the recognition of operating lease liabilities and ROU assets of $25.1 million and $23.6 million, respectively, while our accounting for capital leases (now referred to as finance leases) remained substantially unchanged. The impact of adopting Topic 842 was not material to our Statements of Operations and Statements of Cash Flows. See Note 7, “Leases.”

~~Recent Accounting Pronouncements Not Yet Adopted~~

Financial Instruments

In April 2019, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”), which requires entities to use a current expected credit loss (“CECL”) model to measure impairment for most financial assets that are not recorded at fair value through net income. Under the CECL model, an entity will estimate lifetime expected credit

~~Table of Contents~~

losses considering available relevant information about historical events, current conditions and supportable forecasts. The CECL model does not apply to available-for-sale debt securities. ~~This guidance also expands~~The CECL model is expected to result in more timely recognition of credit losses. The Company adopted the ~~required~~standard on July 1, 2023. Our adoption of the standard did not have a material impact to the condensed consolidated financial statements. The Company makes estimates of expected credit ~~loss~~losses based on a combination of factors, including historical losses adjusted for current market conditions, delinquency trends, aging behaviors of receivables and credit and liquidity indicators, and future market and economic conditions and regularly reviews the adequacy of the allowance for credit losses.

Recent Accounting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. Additionally, ASU 2023-07 requires that all existing annual segment disclosures be provided on an interim basis and clarifies that single reportable segment entities are subject to the disclosure requirement under Topic 280 in its entirety. ASU 2023-07 will be applied ~~using a modified retrospective approach by recording a cumulative effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. ASU 2019-04~~retrospectively and is effective ~~for the Company~~ for fiscal years beginning after December 15, ~~2022, including~~2023 and interim periods ~~within those fiscal years.~~beginning after December 15, 2024. Early adoption is permitted. The Company ~~will adopt this guidance~~is evaluating the impact of ASU 2023-07 on our condensed consolidated financial statements.

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires additional disclosures related to rate reconciliation, income taxes paid, and other disclosures. ASU 2023-09 requires public companies to annually (i) disclose specific categories in the rate reconciliation and (ii) provide additional information for reconciling items that meet a quantitative threshold. Additionally, ASU 2023-09 requires public companies to annually disclose the amount of income taxes paid, disaggregated by federal, state, and

Table of Contents

foreign taxes, as well as the amount of income taxes paid by individual jurisdiction. For public companies, ASU 2023-09 is effective for annual ~~and interim reporting~~ periods beginning ~~July 1, 2023.~~after December 15, 2024. The Company ~~has not determined~~is currently evaluating the ~~effect~~impact of ~~the standard~~ASU 2023-09 on ~~its~~our condensed consolidated financial statements.

We do not expect that any other recently issued accounting guidance will have a significant effect on our condensed consolidated financial statements.

Note 3: Revenue Recognition

~~Under ASC 606, revenue~~Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition, ~~for arrangements that an entity determines are within the scope of ASC 606,~~ the Company performs the following five steps: (i) Identify the contract(s) with a customer; (ii) Identify the performance obligations in the contract; (iii) Determine the transaction price; (iv) Allocate the transaction price to the performance obligations in the contract; and (v) Recognize revenue as the entity satisfies a performance obligation.

Capitation Revenue and Accounts Receivable

Our capitation revenue relates to contracts with participants in which our performance obligation is to provide healthcare services to the participants. Revenues are recorded during the period our obligations to provide healthcare services are satisfied as noted below within each service type. The Company contracts directly with Medicare and Medicaid on a per member, per month (“PMPM”) basis. We receive 100% of the pooled capitated payment to directly provide or manage the healthcare needs of our participants.

Fees are recorded gross in revenues because the Company is acting as a principal in providing for or overseeing comprehensive care provided to the participants. Neither the Company nor any of its affiliates is a registered insurance company because state law in the states in which it operates does not require such registration for risk-bearing providers.

In general, a participant enrolls in the PACE program and is considered a customer of InnovAge. The Company considers all contracts with participants as a single performance obligation to provide comprehensive medical, health, and social services that integrate acute and long-term care. The Company identified that contracts with customers in the PACE program have similar performance obligations and therefore groups them into one portfolio. This performance obligation is satisfied as the Company provides comprehensive care to its participants.

Our revenues are based on the estimated PMPM amounts we expect to be entitled to receive from the capitated fees per participant that are paid monthly by Medicaid, Medicare, the VA, and private pay sources. Medicaid and Medicare capitation revenues are based on PMPM capitation rates under the PACE program. VA is included in “Private Pay and other” and is also capitated. Private pay includes direct payments from participants who do not qualify for the full capitated rate and have to pay all or a portion of the capitated rate. Costs to obtain contracts consist of sales commissions for new enrollees and are included in deposits and ~~other.~~other on our condensed consolidated balance sheets. These costs are amortized over a three-year period which corresponds to the average time a participant is enrolled in the PACE program. As of ~~March~~December 31, 2023 and June 30, ~~2022~~2023, contract assets included within deposits and other were ~~$0.7~~$1.9 million and ~~nil,~~$1.0 million, respectively.

The Company disaggregates capitation revenue from the following sources for the ~~nine~~six months ended:


		March 31,
		2023		2022
	December 31,										December 31,
	2023								2023			2022
Medicaid	Medicaid	55	%	53	%	Medicaid	55	%		55	%
Medicare	Medicare	45	%	46	%	Medicare	45	%		45	%
Private pay and other	Private pay and other	*%		1	%	Private pay and other	*%			*%
Total	Total	100	%	100	%	Total	100	%		100	%

* Less than 1%

~~Table of Contents~~

The Company determined the transaction price for these contracts is the amount we expect to be entitled to, which is the most likely amount. For certain capitation payments, the Company is subject to retroactive premium risk adjustments

Table of Contents

based on various factors. The Company estimates the amount of the adjustment and records it monthly on a straight-line basis. These adjustments are not expected to be material.

The capitation revenues are recognized based on the estimated PMPM transaction price to transfer the service for a distinct increment of the series (i.e. month). We recognize revenue in the month in which participants are entitled to receive comprehensive care benefits during the contract term. As the period between the time of service and time of payment is typically one year or less, the Company elected the practical expedient under ASC 606-10-32-18 and did not adjust for the effects of a significant financing component.

The Company also provides prescription drug benefits in accordance with Medicare Part D. Monthly payments received from CMS and the participants represent the bid amount for providing prescription drug coverage. The portion received from CMS is subject to risk sharing through Medicare Part D risk-sharing corridor provisions. These risk-sharing corridor provisions compare costs targeted in the Company’s bid to actual prescription drug costs. The Company estimates and records a monthly adjustment to Medicare Part D revenues associated with these risk-sharing corridor provisions. Medicare Part D comprised 12% of capitation revenues for each of the three months ended ~~March~~December 31, 2023 and 2022. Medicare Part D comprised of 12% of capitation revenues for each of the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022.

Our accounts receivable as of ~~March~~December 31, 2023 and June 30, ~~2022 is~~2023 are primarily from capitation revenue arrangements. The concentration of net receivables from participants and third-party payers was as follows:


		March 31, 2023		June 30, 2022
	December 31, 2023								December 31, 2023			June 30, 2023
Medicaid	Medicaid	41	%	70	%	Medicaid	57	%		61	%
Medicare	Medicare	52	%	22	%	Medicare	36	%		29	%
Private pay and other	Private pay and other	7	%	8	%	Private pay and other	7	%		10	%
Total	Total	100	%	100	%	Total	100	%		100	%

The Company records accounts receivable at net realizable value, which includes an allowance for estimated uncollectible accounts. The allowance for uncollectible accounts reflects the Company’s best estimate of probable losses considering eligibility, historical experience, and existing economic conditions. The balance of the allowance for uncollectible accounts was ~~$3.9~~$5.1 million as of ~~March~~December 31, 2023, compared to ~~$3.4~~$4.2 million as of June 30, ~~2022.~~2023. Accounts are written off as bad debts when they are deemed uncollectible based upon individual credit evaluations and specific circumstances underlying the accounts.

Other Service Revenue and Accounts Receivable

Other service revenue is comprised of rents earned related to Senior Housing and other fee for service revenue. Other service revenue was 0.2% of total revenue for each of the three months ended December 31, 2023 and 2022. Other service revenue was 0.2% of total revenue for each of the ~~three~~six months ended ~~March~~December 31, 2023 and ~~2022, respectively.~~

~~Other service revenue was 0.2% and 0.2% of total revenue for the nine months ended March 31, 2023 and 2022, respectively.~~2022. Accounts receivable related to other service revenue was not significant as of both ~~March~~December 31, 2023 and June 30, ~~2022.~~2023.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to change, as well as government review. Failure to comply with these laws can expose the entity to significant regulatory action, including fines, penalties, and exclusion from the Medicare and Medicaid programs. See Note 9, “Commitments and Contingencies.”

~~Table of Contents~~

Note 4: Cost Method and Equity Method Investments

The Company holds ~~equity~~cost method and ~~cost~~equity method investments as of:


in thousands	in thousands	March 31, 2023		June 30, 2022		in thousands	December 31, 2023	June 30, 2023
Cost method investments	Cost method investments	$	4,645	$	4,645
Equity method investments	Equity method investments	848		848
Total investments	Total investments	$	5,493	$	5,493

Table of Contents

Nonconsolidated Entities

Cost Method Investments

The Company maintains two investments that are accounted for using the cost method. Our ownership interests are less than 20% of the voting stock of the investments and we do not have the ability to exercise significant influence over the operating and financial policies of the investments. The investments do not have a readily determinable fair value and the Company has elected to record the investments at cost, less impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. During the ~~nine~~three and six months ended ~~March~~December 31, 2023 we noted indicators of impairment in one of our investments, and recognized impairment loss of $1.9 million, respectively, and is presented as other expense on our condensed consolidated Statements of Operation. During the three and six months ended December 31, 2022, there were no observable price changes or impairments recorded.

Jetdoc

In August 2021, the Company acquired a minority interest equal to 806,481 shares of the outstanding common stock of Jetdoc, Inc. (“Jetdoc”), a telehealth and virtual urgent care app dedicated to effectively connecting users with medical professionals, for cash consideration of $2.0 million. Subsequent to December 31, 2023, we noted indicators of impairment in our minority equity investment. We determined that indicators were present as of the reporting date and recognized impairment loss of $1.9 million during the three and six months ended December 31, 2023, which are presented as other expense on our condensed consolidated Statements of Operation. During the three and six months ended December 31, 2022, there were no observable price changes or impairment recorded. The balance of the Company’s investment in Jetdoc as of December 31, 2023 is ~~$2.0~~$0.1 million, which represents the maximum exposure to loss.

DispatchHealth

On June 14, 2019, the Company invested $1.5 million in DispatchHealth Holdings, Inc. ("DispatchHealth"), through the purchase of a portion of its outstanding Series B Preferred Stock. On April 2, 2020, the Company invested an additional $1.1 million through the purchase of a portion of its outstanding Series C Preferred Stock. The balance of the Company’s investment as of December 31, 2023 is $2.6 million, which represents the maximum exposure to loss.

Equity Method Investments

Pinewood Lodge

The Company’s operations include a Senior Housing unit that primarily includes the accounts of Continental Community Housing (“CCH”), the general partner of Pinewood Lodge, LLP (“PWD”), which was organized to develop, construct, own, maintain, and operate certain apartment complexes intended for rental to low-income elderly individuals aged 62 or older.

PWD is a VIE, but the Company is not the primary beneficiary. The Company does not have the power to direct the activities that most significantly impact the economic performance of PWD. Accordingly, the Company does not consolidate PWD. PWD is accounted for using the equity method of accounting. The equity earnings of PWD are insignificant. As of ~~March~~December 31, 2023, the balance of the Company’s investment in PWD was $0.8 million, which represents the maximum exposure to loss.

Noncontrolling Interest

Senior Housing

The Company’s operations include a 0.01% partnership interest in InnovAge Senior Housing Thornton, LLC (“SH1”), which was organized to develop, construct, own, maintain, and operate certain apartment complexes intended for rental to low-income elderly individuals aged 62 or older.

~~Table of Contents~~

SH1 is a VIE. The Company is the primary beneficiary of SH1 and consolidates SH1. The Company is the primary beneficiary of SH1 as it has the power to direct the activities that are most significant to SH1 and has an obligation to absorb losses or the right to receive benefits from SH1. The most significant activity of SH1 is the operation of the senior

Table of Contents

housing facility. The Company has provided a subordinated loan to SH1 and has provided a guarantee for a convertible term loan held by SH1.

Redeemable Noncontrolling Interest

InnovAge Sacramento

On March 18, 2019, in connection with the formation of InnovAge Sacramento, the joint venture with Adventist Health System/West (“Adventist”) and Eskaton Properties, Incorporated (“Eskaton”), the Company contributed $9.0 million in cash and land valued at $4.2 million for a 59.9% membership interest in the joint ~~venture, InnovAge Sacramento.~~venture. Further, Adventist contributed $5.8 million in cash and Eskaton contributed $3.0 million in cash for membership interests of 26.4% and 13.7%, respectively. In fiscal year 2021, the Company made an additional contribution of $52,000 and obtained an additional 0.1% membership interest in the joint venture, which resulted in the Company obtaining control and consolidating InnovAge Sacramento as of January 1, 2021.

The InnovAge California PACE-Sacramento LLC Limited Liability Company Agreement (the “JV Agreement”) includes numerous provisions whereby, if certain conditions are met, the ~~Joint Venture~~joint venture may be required to purchase, at fair market value, certain members’ interests or certain members may be required to purchase, at fair market value, the interests of certain other members. As of ~~March~~December 31, 2023, none of the conditions specified in the JV Agreement had been met. At the time the Company became a publicly traded company these put rights held by the noncontrolling interests of the joint venture were required to be presented as temporary ~~equity. The~~equity and are recorded as redeemable noncontrolling interests on our condensed consolidated Balance Sheets. Redeemable noncontrolling interest of ~~$13.5~~$11.8 million ~~was~~and $12.7 million were recorded at carrying value as of ~~March~~December 31, ~~2023.~~2023 and June 30, 2023, respectively.

Note 5: Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants, at the measurement date. A fair value hierarchy was established that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources outside the reporting entity. Unobservable inputs are inputs that reflect the Company’s own assumptions based on market data and assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The sensitivity to changes in inputs and their impact on fair value measurements can be significant.

The three levels of inputs that may be used to measure fair value are:

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date

Level 2Quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the assets or liabilities

Level 3Unobservable inputs to the valuation techniques that are significant to the fair value measurements of the assets or liabilities

Table of Contents

The following table shows the Company’s cash, cash equivalents and marketable securities by significant investment category as of ~~March~~December 31, 2023 and June 30, 2023:


		December 31, 2023
		December 31, 2023
		December 31, 2023
in thousands
in thousands
in thousands	in thousands	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Short- term Investments
Cash	Cash	$	40,221	$	—	$	—	$	40,221	$	40,221	$	—
Cash
Cash
Level 1
Level 1
Level 1	Level 1
Money market funds	Money market funds	81,485		—		—		81,485		81,485		—
Money market funds
Money market funds
Mutual funds
Mutual funds
Mutual funds	Mutual funds	45,000		847		—		45,847		—		45,847
Total	Total	$	166,706	$	847	$	—	$	167,553	$	121,706	$	45,847
Total
Total

		June 30, 2023

		June 30, 2023

		June 30, 2023
in thousands
in thousands
in thousands
Cash
Cash
Cash
Level 1
Level 1
Level 1
Money market funds
Money market funds
Money market funds
Mutual funds
Mutual funds
Mutual funds
Total
Total
Total

Recurring Measurements

The Company’s investment in InnovAge Sacramento includes a put right for the noncontrolling interest holders to require the Company to repurchase the interest of the noncontrolling interest holders at fair value, after the initial term of the management services agreement in 2028. As a result, at each fiscal period end the Company reports this put right at the greater of (i) carrying value of the redeemable noncontrolling interest or (ii) fair value of the redeemable noncontrolling interest. Because this asset does not have observable inputs, ~~level~~Level 3 inputs are used to measure fair value. The fair value of the redeemable noncontrolling interest is determined utilizing a discounted cash flow model. As of ~~March~~December 31, 2023 and June 30, 2023, the Company’s redeemable noncontrolling interest was recorded at carrying value of ~~$13.5 million.~~$11.8 million and $12.7 million, respectively.

There were no transfers in and out of Level 3 during the ~~nine~~six months ended ~~March~~December 31, 2023 or 2022.

Note 6: Goodwill and Intangible Assets

Goodwill represents the excess of cost over the fair value of net assets acquired. Goodwill amounted to $141.6 million and $124.2 million at each of ~~March~~December 31, 2023 and June 30, ~~2022.~~2023. Goodwill is not amortized.

Pursuant to ASC 350, “Intangibles – Goodwill and Other,” we review the recoverability of goodwill annually as of April 1 or whenever significant events or changes occur which might impair the recovery of recorded amounts. For purposes of the annual goodwill impairment assessment, the Company has identified ~~three~~two reporting units. There were no indicators of impairment identified and no goodwill impairments recorded during the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022.

Table of Contents

Intangible assets consisted of the following as of:


in thousands	in thousands	March 31, 2023		June 30, 2022		in thousands	December 31, 2023	June 30, 2023
Definite-lived intangible assets	Definite-lived intangible assets	$	6,600	$	6,600
Indefinite-lived intangible assets	Indefinite-lived intangible assets	2,000		2,000
Total intangible assets	Total intangible assets	8,600		8,600
Accumulated amortization	Accumulated amortization	(3,237)		(2,742)
Balance as of end of period	Balance as of end of period	$	5,363	$	5,858

Intangible assets consist primarily of customer relationships acquired through business acquisitions. The Company recorded amortization expense of $0.2 million ~~and $0.2 million~~ for each of the three months ended ~~March~~December 31, 2023 and ~~2022, respectively.~~2022. The Company recorded amortization expense of ~~$0.5 million and $0.5~~$0.3 million for each of the ~~nine~~six months ended ~~March~~December 31, 2023 and ~~2022, respectively.~~2022.

We review the recoverability of other intangible assets in conjunction with long-lived assets whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. There were no intangible asset impairments recorded during the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022.

~~Table of Contents~~

Note 7: Leases

Leasing Arrangements as Lessee

The Company leases certain property and equipment under various third-party operating and finance lease agreements. The Company determines if an arrangement is or contains a lease at the lease inception date by evaluating whether the arrangement conveys the right to use an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. The leases are noncancelable and expire on various terms from ~~2023~~2024 through 2032. We determine if an arrangement is a lease upon commencement of the contract. If an arrangement is determined to be a long-term lease (greater than 12 months), we recognize ~~an ROU~~a right-of-use ("ROU") asset and lease liability based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may also include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

We have elected to apply the short-term lease exception for contracts that have a lease term of twelve months or less and do not include an option to purchase the underlying asset. Therefore, we do not recognize aan ROU asset or lease liability for such contracts. We recognize short-term lease payments as expense on a straight-line basis over the lease term. Variable lease payments that do not depend on an index or rate are recognized as expense. Certain leases include escalations based on inflation indexes and fair market value adjustments. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement for such leases.

On March 20, 2023, we consolidated our Germantown center in Pennsylvania with two of our existing centers. Upon consolidation, we terminated our Germantown center lease and recognized lease termination costs of $0.6 million. Lease termination costs are included in other income (expense) on our consolidated statements of operations.

The following table presents the components of our ROU assets and their classification in our Balance Sheet at ~~March~~December 31, 2023:


~~Component of Lease Balances~~	~~Balance Sheet Line Items~~	Nine months ended March 31, 2023
		~~in thousands~~
~~Assets:~~
~~Operating lease assets~~	~~Operating lease assets~~	$	~~21,906~~
~~Finance lease assets~~	~~Property and equipment, net~~	~~16,663~~
~~Total leased assets~~		$	~~38,569~~


Component of Lease Balances	Balance Sheet Line Items	December 31, 2023		June 30, 2023
in thousands
Assets:
Operating lease assets	Operating lease assets	$	26,477	$	21,210
Finance lease assets	Property and equipment, net	14,191		16,378
Total leased assets		$	40,668	$	37,588

Table of Contents

The following table presents the components of our lease cost and the classification of such costs in our Statements of Operations for the ~~nine~~six months ended ~~March 31, 2023:~~December 31:


~~Component of Lease Cost~~	~~Statements of Operations Line Items~~	Nine months ended March 31, 2023
		~~in thousands~~
~~Operating lease cost~~	~~Cost of care excluding depreciation and amortization and Corporate, general and administrative~~	$	~~3,334~~
~~Finance lease expense:~~
~~Amortization of leased assets~~	~~Depreciation and amortization~~	~~2,923~~
~~Interest on lease liabilities~~	~~Interest expense, net~~	~~901~~
~~Variable lease cost~~	~~Cost of care excluding depreciation and amortization and Corporate, general and administrative~~	—
~~Short-term lease cost~~	~~Cost of care excluding depreciation and amortization and Corporate, general and administrative~~	23
~~Total lease expense~~		$	~~7,181~~


		Six Months Ended December 31,
Component of Lease Cost	Statements of Operations Line Items	2023		2022
in thousands
Operating lease cost	Cost of care excluding depreciation and amortization and Corporate, general and administrative	$	2,382	$	2,557
Finance lease expense:
Amortization of leased assets	Depreciation and amortization	2,301		1,685
Interest on lease liabilities	Interest expense, net	—		562
Variable lease cost	Cost of care excluding depreciation and amortization and Corporate, general and administrative	52		—
Short-term lease cost	Cost of care excluding depreciation and amortization and Corporate, general and administrative	94		17
Total lease expense		$	4,829	$	4,821

The following table includes the weighted-average lease terms and discount rates for operating and finance leases as of ~~March 31, 2023:~~December 31:


Weighted average remaining lease term:	~~March~~December 31, 2023	December 31, 2022
Operating leases	14.7 years	8.8 years
Finance leases	3.5 years	3.8 years


~~Weighted average discount rate:~~	March 31, 2023
~~Operating leases~~	~~6.61~~	%
~~Finance leases~~	~~8.76~~	%


Weighted average discount rate:	December 31, 2023		December 31, 2022
Operating leases	12.85	%	6.61	%
Finance leases	7.95	%	8.53	%

The following table includes the future maturities of lease payments for operating leases and finance leases for periods subsequent to ~~March~~December 31, 2023:


in thousands	in thousands	Operating Lease		Finance Lease		Total		in thousands	Operating Lease	Finance Lease	Total
Amount remaining in 2023		$	1,645	$	1,747	$	3,392
2024		4,651		5,828		10,479
Amount remaining in 2024
2025	2025	4,345		5,045		9,390
2026	2026	4,274		4,021		8,295
2027	2027	3,981		3,325		7,306
2028
Thereafter	Thereafter	10,173		1,587		11,760
Total lease payments	Total lease payments	29,069		21,553		50,622
Less liability accretion / imputed interest	Less liability accretion / imputed interest	(5,557)		(3,226)		(8,783)
Total lease liabilities	Total lease liabilities	23,512		18,327		41,839
Less: Current lease liabilities	Less: Current lease liabilities	3,402		4,946		8,348
Total long-term lease liabilities	Total long-term lease liabilities	$	20,110	$	13,381	$	33,491

Table of Contents

The following table includes the future maturities of minimum rental payments that are required to be paid under all non-cancelable operating and capital lease obligations as previously disclosed in our 2022 10-K, prior to the adoption of ASC 842:

in thousands Operating
Lease Capital
Lease
Amount remaining in 2023 $ 4,873 $ 4,405
2024 4,581 3,909
2025 4,122 3,126
2026 4,061 2,092
2027 3,764 1,393
Thereafter 10,265 535
Total minimal rental payments 31,666 15,460
Less: Amount representing interest (2,652)
Subtotal 12,808
Current portion 3,368
Long-term portion $ 9,440

Note 8. Long-Term Debt

Long-term debt consisted of the following at ~~March~~December 31, 2023 and June 30, ~~2022:~~2023:


		March 31, 2023		June 30, 2022
		in thousands
	December 31, 2023					December 31, 2023		June 30, 2023
	in thousands						in thousands
Senior secured borrowings:	Senior secured borrowings:
Term Loan Facility
Term Loan Facility
Term Loan Facility	Term Loan Facility	$	68,438	$	71,250
Convertible term loan	Convertible term loan	2,296		2,327
Total debt	Total debt	70,734		73,577
Less: unamortized debt issuance costs	Less: unamortized debt issuance costs	1,252		1,574
Less: current maturities	Less: current maturities	3,795		3,793
Noncurrent maturities	Noncurrent maturities	$	65,687	$	68,210

2021 Credit Agreement

On March 8, 2021, the Company entered into a credit agreement ~~(the~~(as amended, the “2021 Credit Agreement”) that replaced its prior credit agreement. The 2021 Credit Agreement consists 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, each with a maturity date of March 8, 2026. ~~The remaining~~Borrowing capacity under the Revolving Credit Facility ~~as of March 31, 2023 was $97.0 million,~~is subject to (i) any issued amounts under our letters of credit, which as of ~~March~~December 31, 2023 was ~~$3.0~~$3.1 million, and (ii) applicable to covenant compliance restrictions and any other conditions precedent to borrowing. Loans under the 2021 Credit Agreement are secured by substantially all of the Company’s assets. Principal on the Term Loan Facility is paid each calendar quarter in an amount equal to 1.25% of the initial term loan on closing date. ~~Proceeds of the Term Loan Facility, together with proceeds from the Company’s initial public offering (“IPO”), were used to repay long term debt amounts then outstanding.~~

Outstanding principal amounts under the 2021 Credit Agreement accrue interest at a variable interest rate. As of ~~March~~December 31, 2023, the interest rate on the Term Loan Facility was ~~6.60%~~7.30%. Under the terms of the 2021 Credit Agreement, the Revolving Credit Facility fee accrues at 0.25% of the average daily unused amount and is paid quarterly. As of ~~March~~December 31, 2023, we had no borrowings outstanding, ~~$3.0~~$3.1 million of letters of credit issued, and ~~$97.0~~$96.9 million of remaining capacity under the Revolving Credit Facility.

~~Table of Contents~~

The 2021 Credit Agreement requires the Company to meet certain operational and reporting requirements, including, but not limited to, a secured net leverage ratio. Additionally, annual capital expenditures and permitted investments, including acquisitions, are limited to amounts specified in the 2021 Credit Agreement. The 2021 Credit Agreement also provides certain restrictions on dividend payments and other equity transactions and requires the Company to make prepayments under specified circumstances. As of ~~March~~December 31, 2023, the Company was in compliance with the covenants of the 2021 Credit Agreement.

The deferred financing costs of ~~$1.3~~$2.0 million are amortized over the term of the underlying debt and unamortized amounts have been offset against long-term debt in the condensed consolidated balance sheets. Total amortization of deferred financing costs was $0.1 million for each of the three months ended December 31, 2023 and ~~$0.3~~2022. Total amortization of deferred financing costs was $0.2 million for each of the ~~three and nine~~six months ended ~~March~~December 31, 2023 ~~respectively.~~and 2022.

Convertible Term Loan

On June 29, 2015, SH1 entered into a convertible term loan. Monthly principal and interest payments of $0.02 million commenced on September 1, 2015. The loan bears interest at an annual rate of 6.68%, with the remaining principal balance due upon maturity at August 20, 2030. The loan is secured by a deed of trust to Public Trustee, assignment of leases and rents, security agreements, and SH1’s fixture filing.

Table of Contents

Note 9: Commitments and Contingencies

Professional Liability

The Company pays fixed premiums for annual professional liability insurance coverage under a claims-made policy. Under such policy, only claims made and reported to the insurer are covered during the policy term, regardless of when the incident giving rise to the claim occurred. The Company records claim liabilities and expected recoveries, if any, at gross amounts. The Company is not currently aware of any unasserted claims or unreported incidents that are expected to exceed medical malpractice insurance coverage limits.

Litigation

From time to time, in the normal course of business, the Company is involved in, or subject to, legal proceedings related to its business, including those described below. The Company regularly evaluates the status of claims and legal proceedings in which it is involved in order to assess whether a loss is probable or there is a reasonable possibility that a loss may have been incurred, and to determine ifwhether accruals are appropriate. The Company expenses legal costs as such costs are incurred.

On October 14, 2021, and subsequently amended on June 21, 2022, the Company was named as a defendant in a putative class action complaint filed in the District Court for the District of Colorado on behalf of individuals who purchased or acquired shares of the Company’s common stock during a specified period. Through the complaint, plaintiffs are asserting claims against the Company, certain of the Company’s officers and directors, the Company’s former CEO, Apax Partners, L.P., Welsh, Carson, Anderson & Stowe and the underwriters in the Company’s IPO alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for making allegedly inaccurate and misleading statements and omissions in connection with the Company’s IPO and subsequent earnings calls and public filings, and seeking to impose control person liability against the officer and director defendants, Apax Partners, L.P. and Welsh, Carson, Anderson & Stowe. The complaint seeks compensatory damages, among other things. On September 13, 2022, the Company and the officer and director defendants and Apax Partners, L.P. and Welsh, Carson, Anderson & Stowe filed a motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted. We are currently unable to predict the outcome of this matter.Civil Investigative Demands

In July 2021, the Company received a civil investigative demand from the Attorney General for the State of Colorado under the Colorado Medicaid False Claims Act. The demand requests information and documents regarding Medicaid billing, patient services and referrals in connection with the Company’s PACE program in Colorado. ~~The Company continues~~We continue to fully cooperate with the Attorney General and produce the requested information and documentation. We are currently unable to predict the outcome of this investigation.

~~Table of Contents~~

In February 2022, the Company received a civil investigative demand from the Department of Justice (“DOJ”) under the Federal False Claims Act on similar subject matter. The demand requests information and documents regarding audits, billing, orders tracking, and quality and timeliness of patient services in connection with the Company’s PACE programs in the states where the Company operates (California, Colorado, New Mexico, Pennsylvania, and Virginia). In December 2022, the Company received a supplemental civil investigative demand requesting supplemental information on the same matters. The Company continues to fully cooperate with the DOJ and produce the requested information and documentation. We are currently unable to predict the outcome of this investigation.

Stockholder Lawsuits

On October 14, 2021, and subsequently amended on June 21, 2022, the Company was named as a defendant in a putative class action complaint filed in the District Court for the District of Colorado on behalf of individuals who purchased or acquired shares of the Company’s common stock during a specified period (the "Securities Action"). Through the complaint, plaintiffs are asserting claims against the Company, certain of the Company’s officers and directors, Apax Partners, L.P., Welsh, Carson, Anderson & Stowe and the underwriters in the Company’s IPO, alleging violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 for making allegedly inaccurate and misleading statements and omissions in connection with the Company’s IPO and subsequent earnings calls and public filings, and seeking compensatory damages, among other things. On September 13, 2022, the Company and the officer and director defendants and Apax Partners, L.P. and Welsh, Carson, Anderson & Stowe filed a motion to dismiss the amended complaint for failure to state a claim upon which relief can be granted. On December 22, 2023, the District Court granted in part and denied in part the motion to dismiss. The action is now proceeding to discovery.

On April 20, 2022, the Board of Directors of the Company received a books and records demand pursuant to Section 220 of the Delaware General Corporation Law, from a purported stockholder of the Company, Brian Hall, in connection with the stockholder’s investigation of, among other matters, potential breaches of fiduciary duty, mismanagement, self-dealing, corporate waste or other violations of law by the Company’s Board with respect to these matters. On May 15, 2023, Mr. Hall filed a lawsuit in the Delaware Court of Chancery asserting derivative claims for breach of fiduciary duty against certain of the Company’s current and former officers and directors generally relating to alleged failures by the defendants to take remedial actions to address the matters that resulted in sanctions by CMS at certain of the Company’s centers, and alleged misstatements in the Company’s public filings relating to those matters. On June 28, 2023, upon stipulation of the parties, the court entered an order staying the litigation pending the resolution of the motion to dismiss in

Table of Contents

the Securities Action or upon fifteen days’ notice by any party to the litigation. On January 22, 2024, upon stipulation of the parties, the court entered an order further staying the litigation pending the close of fact discovery in the Securities Action.

We are currently unable to predict the outcome of ~~this matter.~~these matters.

Other Matters

In the ~~first~~third fiscal quarter of 2023, the Company agreed to settle a wage and hour class action lawsuit in the State of California for a cash payment of $1.2 million. Subsequently, the Company was notified of certain additional individual claims and has agreed to include such claims within the class. As a result, in October 2023, the Company agreed to increase the settlement amount to a total of $1.3 million. The agreement is subject to court ~~approval.~~approval, which we expect to occur in the second half of fiscal 2024.

Because the results of legal proceedings and claims are inherently unpredictable and uncertain, we are currently unable to predict whether the legal proceedings we are involved in will, either individually or in the aggregate, have a material adverse effect on our business, financial condition, or cash flows. The outcomes of legal proceedings and claims could be material to the Company’s operating results for any particular period, depending in part, upon the operating results of such period. Regardless of the outcome, litigation has the potential to have an adverse impact on us due to any related defense and settlement costs, diversion of management resources, and other factors.

Note 10: Stock-based Compensation

A summary of our aggregate stock-based compensation expense is set forth below. Stock-based compensation expense is included in corporate, general and administrative expenses on our condensed consolidated ~~statements~~Statements of ~~operations.~~Operations.


	Three months ended December 31,										Three months ended December 31,				Six months ended December 31,
	2023									2023		2022		2023		2022
	in thousands												in thousands
		Three months ended March 31,				Nine months ended March 31,
		2023		2022		2023		2022
		in thousands				in thousands

Stock options
Stock options
Stock options	Stock options	$	246	$	269	$	780	$	359
Profits interests units	Profits interests units	205		66		662		1,095
Restricted stock units	Restricted stock units	757		510		2,279		1,132
Total stock-based compensation expense	Total stock-based compensation expense	$	1,208	$	845	$	3,721	$	2,586

2020 Equity Incentive Plan

Profits Interests

TCO Group Holdings, L.P. (the “LP”), the Company’s largest shareholder and prior to the IPO, the Company’s parent, maintains the ~~2020~~TCO Group Holdings, L.P. Equity Incentive Plan (the "2020 Equity Incentive Plan") pursuant to which interests in the LP in the form of Class B Units (profits interests) ~~could~~can be granted to employees, directors, consultants, advisers, and ~~advisers.~~other service providers (including partners) of the LP or any of its affiliates, including the Company. A maximum number of 16,162,177 Class B Units ~~were~~are authorized for grant under the 2020 Equity Incentive ~~Plan.~~Plan, and both performance-based and time-based units have been issued under the plan. As of ~~March~~December 31, 2023, a total of ~~13,009,137~~15,222,837 profits interests units had been granted under the 2020 Equity Incentive Plan.

The Company used the Monte Carlo option model to determine the fair value of the profits interests units at the time of the grant. ~~There~~A total of 2,213,700 Class B Units were ~~no grants~~ awarded during the ~~three and nine~~six months ended ~~March~~December 31, ~~2023.~~2023 to the Company's Chief Executive Officer, Chief Financial Officer, and Chief Legal Officer. The assumptions under the Monte Carlo model related to the profits interests units, presented on a weighted-average basis, are provided below:

Table of Contents


		2023
Expected volatility		74.0-76.0	%
Expected life (years) - time vesting units		3.0 - 3.1
Interest rate		4.52 - 4.57	%
Dividend yield		—
Weighted-average fair value	$	1.95 - 2.17
Fair value of underlying stock	$	5.53 - 7.27

A summary of profits interests activity for the ~~nine~~six months ended ~~March~~December 31, 2023 ~~was~~is as follows:


Time-based unit awards	Time-based unit awards	Number of units	Weighted average grant date fair value		Time-based unit awards	Number of units	Weighted average grant date fair value

Outstanding balance, June 30, 2022		2,158,071	$	1.28
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Granted	Granted	—	$	—
Forfeited	Forfeited	(49,654)	$	1.28
Vested	Vested	(844,081)	$	1.28
Outstanding balance, March 31, 2023		1,264,336	$	1.28
Outstanding balance, December 31, 2023


Performance-based unit awards	Performance-based unit awards	Number of units	Weighted average grant date fair value		Performance-based unit awards	Number of units	Weighted average grant date fair value

Outstanding balance, June 30, 2022		2,217,865	$	0.57
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Granted	Granted	—	$	—
Forfeited	Forfeited	(99,307)	$	0.57
Vested	Vested	—	$	—
Outstanding balance, March 31, 2023		2,118,558	$	0.57
Outstanding balance, December 31, 2023

The total unrecognized compensation cost related to profits interests units outstanding as of ~~March~~December 31, 2023 was ~~$2.3~~$4.0 million, comprised (i) ~~$1.1~~$1.8 million related to time-based unit awards expected to be recognized over a weighted-average period of ~~0.9~~2.9 years and (ii) ~~$1.2~~$2.2 million related to performance-based unit awards, which will be recorded when it is probable that the performance-based criteria will be met.

2021 Omnibus Incentive Plan

In March 2021, the compensation committee of our Board of Directors approved the InnovAge Holding Corp. 2021 Omnibus Incentive Plan (the “2021 Omnibus Incentive Plan”), pursuant to which various stock-based awards may be granted to employees, directors, consultants, and advisers. The total number of shares of the Company’s common stock authorized under the 2021 Omnibus Incentive Plan is 14,700,000. The Company has issued time-based restricted stock units under this plan to its employees which generally vest (i) on March 4, 2023, the second anniversary of the grant date, or (ii) over a three-year period with one-third vesting on each anniversary of the date of grant. Certain other vesting periods have also been used. The grant date fair value of restricted stock units with time based vesting is based on the closing market price of our common stock on the date of grant. Certain awards under this plan vest upon achieving specific share price performance criteria and are determined to have performance-based vesting conditions. The Company has also issued time-based stock options under this plan to its employees which generally vest at various intervals over a three-year period. ~~Certain awards under this plan vest upon achieving specific share price performance criteria and are determined to have performance-based vesting conditions.~~

Table of Contents

Restricted Stock Units

A summary of time-based vesting restricted stock units activity for the ~~nine~~six months ended ~~March~~December 31, 2023 ~~was~~is as follows:


Restricted stock units - time based	Restricted stock units - time based	Number of awards	Weighted average grant-date fair value per share		Restricted stock units - time based	Number of awards	Weighted average grant-date fair value per share

Outstanding balance, June 30, 2022		476,768	$	9.69
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Granted	Granted	1,048,298	$	6.07
Forfeited	Forfeited	(184,141)	$	5.44
Vested	Vested	(124,919)	$	5.23
Outstanding balance, March 31, 2023		1,216,006	$	6.61
Outstanding balance, December 31, 2023

The total unrecognized compensation cost related to time based restricted stock units outstanding as of ~~March~~December 31, 2023 was ~~$6.2~~$7.6 million and is expected to be recognized over a weighted-average period of ~~2.1~~1.9 years.

A summary of performance based vesting restricted stock units activity for the ~~nine~~six months ended ~~March~~December 31, 2023 ~~was~~is as follows:


Restricted stock units - performance based	Restricted stock units - performance based	Number of awards	Weighted average grant-date fair value per share		Restricted stock units - performance based	Number of awards	Weighted average grant-date fair value per share

Outstanding balance, June 30, 2022		258,767	$	5.18
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Granted	Granted	—	$	—
Forfeited	Forfeited	—	$	—
Vested	Vested	—	$	—
Outstanding balance, March 31, 2023		258,767	$	5.18
Outstanding balance, December 31, 2023

The total unrecognized compensation cost related to performance based vesting restricted stock units outstanding as of ~~March~~December 31, 2023 was ~~$0.9~~$0.6 million and is expected to be recognized over a weighted-average period of ~~2.6~~1.9 years.

Nonqualified Stock Options

A summary of time-based vesting stock option activity for the ~~nine~~six months ended ~~March~~December 31, 2023 ~~was~~is as follows:


Stock options - time based	Stock options - time based	Number of awards	Weighted average grant-date fair value per share		Stock options - time based	Number of awards	Weighted average grant-date fair value per share

Outstanding balance, June 30, 2022		554,499	$	1.61
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Granted	Granted	162,162	$	0.80
Forfeited	Forfeited	—	$	—
Exercised	Exercised	—	$	—
Expired	Expired	—	$	—
Outstanding balance, March 31, 2023		716,661	$	1.21
Outstanding balance, December 31, 2023

Exercisable balance, March 31, 2023		173,280	$	0.24
Exercisable balance, December 31, 2023
Exercisable balance, December 31, 2023
Exercisable balance, December 31, 2023

Table of Contents

The total unrecognized compensation cost related to time-based vesting stock options outstanding as of ~~March~~December 31, 2023 was ~~$0.4~~$0.2 million and is expected to be recognized over a weighted-average period of ~~1.9~~1.8 years.

~~The fair value of the time-based stock options granted during the nine months ended March 31, 2023, was based upon the Black-Scholes option pricing model using the assumptions in the following table:~~


	~~2023~~
~~Expected volatility~~	~~34.5~~		%
~~Weighted-average expected life (years) - time vesting units~~	~~2.9~~
~~Interest rate~~	~~1.56~~		%
~~Dividend yield~~	0		%
~~Weighted-average fair values~~	$	~~0.80~~
~~Fair value of underlying stock~~	$	~~3.70~~

A summary of performance-based vesting stock option activity for the ~~nine~~six months ended ~~March~~December 31, 2023 ~~was~~is as follows:


Stock options - performance based	Stock options - performance based	Number of awards	Weighted average grant-date fair value per share		Stock options - performance based	Number of awards	Weighted average grant-date fair value per share

Outstanding balance, June 30, 2022		776,299	$	3.08
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Outstanding balance, June 30, 2023
Granted	Granted	—	$	—
Forfeited	Forfeited	—	$	—
Vested	Vested	—	$	—
Outstanding balance, March 31, 2023		776,299	$	3.08
Outstanding balance, December 31, 2023

The total unrecognized compensation cost related to performance-based vesting stock options outstanding as of ~~March~~December 31, 2023 was ~~$1.6~~$1.1 million and is expected to be recognized over a weighted-average period of ~~2.7~~2.0 years.

Note 11: Acquisitions

On December 1, 2023, the Company acquired all of the issued and outstanding membership interests of two California-based PACE programs, ConcertoCare PACE of Bakersfield, LLC and ConcertoHealth PACE of Los Angeles, LLC (collectively "Concerto"), from Perfect Health, Inc. d/b/a ConcertoCare, a tech-enabled, value-based provider of at-home, comprehensive care for seniors and other adults with unmet health and social needs, for $23.9 million. We believe the Concerto acquisition compliments our California PACE centers. The acquisition was funded through cash on hand. Results of operations from the acquisition are included in our condensed consolidated Statements of Operations for the three and six months ended December 31, 2023 and were not significant to our results. We incurred costs related to the acquisition of approximately $0.1 million during the six months ended December 31, 2023. Acquisition related costs were expensed as incurred and have been recorded in corporate, general and administrative expenses in our condensed consolidated Statements of Operations.

The Concerto acquisition was accounted for using the purchase method of accounting. The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair values of assets acquired and liabilities assumed may change as the valuation of intangible assets and overall purchase price allocation is being finalized. Goodwill represents the excess of the purchase price over the fair value

Table of Contents

of net assets acquired. Goodwill recognized represents the estimated future economic benefits arising from expected growth opportunities for the Company and is not deductible for income tax purposes.

The following table presents a preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date:


	December 1, 2023
	in thousands
Cash Consideration	$	23,916
Total Consideration	$	23,916

Accounts receivable, net	$	563
Prepaid expenses	330
Property and equipment, net	7,969
Operating lease assets	6,892
Goodwill	17,348
Deposits and other	343
Accounts payable and accrued expenses	(353)
Reported and estimated claims	(111)
Operating lease obligations	(8,941)
Finance lease obligations	(124)
Fair value of assets and liabilities	$	23,916

Note 12: Income Taxes

The Company recorded an income tax ~~benefit~~expense of ~~$1.4~~$0.1 million and an income tax benefit of ~~$4.1~~$2.9 million for the three months ended ~~March~~December 31, 2023 and 2022, respectively. The Company recorded an income tax ~~benefit~~expense of ~~$7.7~~$0.3 million and an income tax ~~provision~~benefit of ~~$0.1~~$6.4 million for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. This represents an effective tax rate of ~~17.2%~~(2.5)% and ~~56.6%~~20.9% for the three months ended ~~March~~December 31, 2023 and 2022, respectively. This represents an effective tax rate of ~~19.7%~~(2.2)% and ~~1.4%~~20.9% for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively.

The effective rate for the ~~nine~~six months ended ~~March~~December 31, 2023 was different from the federal statutory rate primarily due to the Company’s book loss offset partially by disallowed officers’ compensation under Internal Revenue Code (“IRC”) Section 162(m), disallowed stock options related to the profit interest units, exclusion of losses from entities not subject to tax, ~~and~~ lobbying expenses, and the increase in the Company's valuation allowance against Net operating losses which occurred during the ~~three month~~three-month period.

The Company assesses the valuation allowance recorded against deferred tax assets at each reporting date. The determination of whether a valuation allowance for deferred tax assets is appropriate requires the evaluation of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income available to realize deferred tax assets, including, as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating income taxes, the Company assesses the relative merits and risks of the appropriate income tax treatment of transactions taking into account statutory, judicial, and regulatory guidance. As of the ~~nine-month~~six-month period ended ~~March~~December 31, 2023, the Company ~~has~~ determined that it is not “more likely than not” that the deferred tax assets associated with certain state net operating losses will be realized and as such continues to maintain a valuation allowance against these state deferred tax assets. The Company ~~has~~ also determined it is not "more likely than not" that the deferred tax assets associated with certain federal net operating losses will be realized and as such has

~~Table of Contents~~

included a valuation allowance against these federal deferred tax assets. The Company has provided ~~$4.7~~$16.8 million at ~~March~~December 31, 2023 and ~~$4.1~~$8.3 million at June 30, ~~2022,~~2023, as a valuation allowance against its deferred tax assets for federal and state net operating losses where there is not sufficient positive evidence to substantiate that these deferred tax assets will be realized at a more-likely-than-not level of assurance.

Table of Contents

Note ~~12:~~13: Earnings per Share

Basic earnings (loss) per share (“EPS”) is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding options, using the treasury stock method and the average market price of the Company’s common stock during the applicable period. When a loss from continuing operations exists, all dilutive securities and potentially dilutive securities are anti-dilutive and are therefore excluded from the computation of diluted ~~earnings per share.~~EPS. When net income from continuing operations exists, performance-based units, are omitted from the calculation of diluted EPS until it is determined that the performance criteria has been met at the end of the reporting period. For the three and ~~nine~~six months ended ~~March~~December 31, 2023, ~~659,761~~391,598 and ~~37,901~~377,025 potentially diluted securities ~~respectively,~~ were excluded from the weighted-average shares used to calculate the diluted net loss per common share, respectively, as they would have an anti-dilutive effect. ~~There were no potentially anti-dilutive shares for~~During the three and ~~nine~~six months ended ~~March~~December 31, ~~2022.~~2022, 424,316 and 14,076 potentially dilutive securities were excluded from the weighted average shares used to calculate the diluted net loss per common share, respectively, as they would have an anti-dilutive effect.

The following table sets forth the computation of basic and diluted net loss per common share:


		Three months ended March 31,				Nine months ended March 31,
		Three months ended December 31,
		Three months ended December 31,
		Three months ended December 31,
in thousands, except share values	in thousands, except share values	2023		2022		2023		2022
Net income (loss) attributable to InnovAge Holding Corp.		$	(6,630)	$	(2,821)	$	(29,496)	$	6,188
in thousands, except share values
in thousands, except share values
Net loss attributable to InnovAge Holding Corp.
Net loss attributable to InnovAge Holding Corp.
Net loss attributable to InnovAge Holding Corp.
Weighted average common shares outstanding (basic)	Weighted average common shares outstanding (basic)	135,601,327		135,516,608		135,581,971		135,516,544
Weighted average common shares outstanding (basic)
Weighted average common shares outstanding (basic)
EPS (basic)
EPS (basic)
EPS (basic)	EPS (basic)	$	(0.05)	$	(0.02)	$	(0.22)	$	0.05

Dilutive shares	Dilutive shares	—		—		—		14,249

Dilutive shares

Dilutive shares
Weighted average common shares outstanding (diluted)
Weighted average common shares outstanding (diluted)
Weighted average common shares outstanding (diluted)	Weighted average common shares outstanding (diluted)	135,601,327		135,516,608		135,581,971		135,530,793
EPS (diluted)	EPS (diluted)	$	(0.05)	$	(0.02)	$	(0.22)	$	0.05
EPS (diluted)
EPS (diluted)

Note ~~13:~~14: Segment Reporting

The Company applies ASC Topic 280, "Segment Reporting," which establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about operations, major customers and the geographies in which the entity holds material assets and reports revenue. An operating segment is defined as a component that engages in business activities whose operating results are reviewed by the Company’s chief executive officer, who is the chief operating decision maker (“CODM”), and for which discrete financial information is available. The Company has determined that it has ~~five~~three operating segments, ~~three~~two of which are related to the Company’s PACE offering. The PACE-related operating segments are based on ~~three~~two geographic divisions, which are ~~West, Central,~~East and ~~East.~~West. Due to the similar economic characteristics, nature of services, and customers, we have aggregated our ~~West, Central,~~East and ~~East~~West operating segments into one reportable segment for PACE. The Company’s remaining ~~two~~ operating ~~segments relate~~segment primarily relates to ~~Homecare and~~ Senior Housing, which ~~are~~is an immaterial operating ~~segments,~~segment, and ~~are~~ shown below as "Other" along with certain corporate unallocated expenses.

The Company evaluates performance and allocates capital resources to each segment based on an operating model that is designed to maximize the ~~provision~~quality of ~~services~~care provided and profitability. The Company does not review assets by segment and therefore assets by segment are not disclosed below. For the periods presented, all of the Company’s long-lived assets were located in the United States and all revenue was earned in the United States.

The Company’s management uses Center-level Contribution Margin as the measure for assessing performance of its operating segments. Center-level Contribution Margin is defined as total segment revenues less external provider costs and cost of care (excluding depreciation and amortization)~~, which includes all medical and pharmacy costs.~~. The Company allocates corporate level expenses to its segments with a majority of the allocation going to the PACE segment.

2526

Table of Contents

The following table summarizes the operating results regularly provided to the CODM by reportable segment for the three months ended ~~March~~December 31, 2023 and 2022:


		March 31, 2023						March 31, 2022
	December 31, 2023																December 31, 2023				December 31, 2022
(In thousands)	(In thousands)	PACE		All other(1)		Totals		PACE		All other(1)		Totals		(In thousands)	PACE	All other(1)		Totals	PACE	All other(1)		Totals
Capitation revenue	Capitation revenue	$	172,196	$	—	$	172,196	$	176,988	$	—	$	176,988
Other service revenue	Other service revenue	87		256		343		166		205		371
Total revenues	Total revenues	172,283		256		172,539		177,154		205		177,359
External provider costs	External provider costs	89,805		—		89,805		103,254		—		103,254
Cost of care, excluding depreciation and amortization	Cost of care, excluding depreciation and amortization	53,861		88		53,949		45,995		107		46,102
Center-Level Contribution Margin	Center-Level Contribution Margin	28,617		168		28,785		27,905		98		28,003
Overhead costs(2)	Overhead costs(2)	33,041		(79)		32,962		30,911		(85)		30,826
Depreciation and amortization	Depreciation and amortization	3,858		134		3,992		3,760		90		3,850
Interest expense, net	Interest expense, net	(360)		(45)		(405)		(663)		(46)		(709)
Other income (expense)		(101)		—		(101)		108		—		108
Income (Loss) Before Income Taxes		$	(8,743)	$	68	$	(8,675)	$	(7,321)	$	47	$	(7,274)
Other income
Other expense
Loss Before Income Taxes

The following table summarizes the operating results regularly provided to the CODM by reportable segment for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022:


		March 31, 2023						March 31, 2022
	December 31, 2023																December 31, 2023				December 31, 2022
in thousands	in thousands	PACE		All other(1)		Totals		PACE		All other(1)		Totals		in thousands	PACE	All other(1)		Totals	PACE	All other(1)		Totals
Capitation revenue	Capitation revenue	$	510,268	$	—	$	510,268	$	524,507	$	—	$	524,507
Other service revenue	Other service revenue	263		682		945		234		1,039		1,273
Total revenues	Total revenues	510,531		682		511,213		524,741		1,039		525,780
External provider costs	External provider costs	279,550		—		279,550		284,299		—		284,299
Cost of care, excluding depreciation and amortization	Cost of care, excluding depreciation and amortization	158,455		426		158,881		128,573		1,167		129,740
Center-Level Contribution Margin	Center-Level Contribution Margin	72,526		256		72,782		111,869		(128)		111,741
Overhead costs(2)	Overhead costs(2)	100,148		—		100,148		93,463		(98)		93,365
Depreciation and amortization	Depreciation and amortization	10,739		348		11,087		10,130		305		10,435
Interest expense, net	Interest expense, net	(1,095)		(136)		(1,231)		(1,783)		(147)		(1,930)
Other income (expense)		380		—		380		(357)		(1)		(358)
Other income
Other expense
Income (Loss) Before Income Taxes	Income (Loss) Before Income Taxes	$	(39,076)	$	(228)	$	(39,304)	$	6,136	$	(483)	$	5,653

(1)Center-level Contribution Margin from segments below the quantitative thresholds are primarily attributable to ~~two~~the Senior Housing operating ~~segments~~segment of the Company. ~~Those segments consist of Homecare and Senior Housing. Neither of those segments~~This segment has ~~ever~~never met any of the quantitative thresholds for determining reportable segments.

(2)Overhead consists of the Sales and marketing and Corporate, general and administrative financial statement line items.

Note ~~14:~~15: Related Party Transactions

Pursuant to the PWD Amended and Restated Agreement of Limited Partnership, the general partner, ~~who~~which is a subsidiary of the Company (the “General Partner”), ~~funded~~funds operating deficits and shortfalls of PWD in the form of a loan. At each of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, $0.7 million was recorded in Deposits and other. Additionally, the General Partner is paid an administration fee of $35,000 per year.

2627

Table of Contents

Note ~~15:~~16: Subsequent Events

~~Effective May 1, 2023,~~

The Company has evaluated subsequent events through the ~~California Department of Health Care Services (“DHCS”) released~~date on which the Company’s center in Sacramento, California from enrollment sanction. The action by DHCS follows the previously announced release of sanction by the Centers for Medicare and Medicaid Services in November of 2022. The release of both sanctions permits the Company to resume normal enrollment at the Company’s center in Sacramento, California. CMS and DHCS will require the Company to conduct post-sanction corrective action and monitoring activities to address any issues identified during the validation audits.condensed consolidated financial statements were issued.

2728

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. The discussion contains forward-looking statements that are based on the beliefs of management, as well as assumptions made by, and information currently available to our management. Readers are cautioned not to place undue reliance on any forward-looking statements, as forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly due to numerous known and unknown risks and uncertainties, including those discussed below and in the section entitled “Cautionary Note on Forward-Looking Statements.” Those known risks and uncertainties include, but are not limited to, the risk factors identified in the section titled “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended June 30, ~~2022~~2023 (“~~2022~~2023 10-K”).

Overview

InnovAge Holding Corp. (“InnovAge”) became a public company in March 2021. As of ~~March~~December 31, 2023, the Company served approximately ~~6,310~~6,780 PACE participants, and operated 1718 PACE centers across California, Colorado, ~~California,~~ New Mexico, Pennsylvania, and Virginia. ~~During the third quarter ended March 31, 2023, the Company consolidated its Germantown LIFE center with its Allegheny and Henry Avenue LIFE centers in Pennsylvania.~~

Trends and Uncertainties Affecting the Company

Macroeconomic conditions. During fiscal year ~~2022,~~2024, the U.S. ~~and global economies experienced adverse macroeconomic effects in part resulting from the ongoing effects of the COVID-19 pandemic, as discussed in more detail below. These effects included~~continued to wrestle with inflation and increased wages due to labor ~~shortages.~~shortages and increased competition among healthcare professionals. In fiscal year 2022 and 2023, in response to high levels of inflation, we ~~began to implement~~implemented various mitigation strategies to reduce costs of operation, including, consolidating services, ~~and~~ price negotiations with providers and ~~vendors. While inflationary pressures eased slightly~~vendors and limiting corporate staffing, effecting a reduction in workforce in December 2022. For example, in fiscal year 2023, we launched and conducted several initiatives intended to lower certain of our costs, including limiting corporate staffing, effecting a reduction in workforce in December 2022, and optimizing working capital. The Company has continued these mitigation strategies during the six months ended December 31, 2023. For example, in October 2023, we conducted an additional planned reduction in workforce involving approximately 1.6% of our workforce. In connection with the planned reduction, we incurred approximately $0.3 million of charges associated with employee severance and benefits costs during the three ~~and nine~~ months ended March 31, 2023, inflation has continued during fiscal 2023 and is expected to continue through the remainder of the fiscal year. As a result, the Company has continued the mitigation strategies discussed during the nine months ended MarchDecember 31, 2023. The effects of inflation, after accounting for these mitigation strategies, were immaterial to our financial results for the three and ~~nine~~six months ended ~~March~~December 31, 2023. We expect to continue to experience elevated operating expenses for the remainder of fiscal 2024 for similar reasons. Although we expect to continue mitigation efforts, there can be no assurance that our strategies will be sufficient.

~~In addition, the increased wage pressure, exacerbated by the labor shortage, increased the~~Increased cost of providing care and our overall operating expenses during the nine months ended March 31, 2023. The combination of increased wage pressure and labor shortage amongst healthcare personnel, and specifically, trained personnel, has impacted and may continue to impact our expenses and ability to adhere to the complex government laws and regulations that apply to our business.

~~Furthermore, operating expenses increased $31.8 million, or 6.1%, for the nine months ended March 31, 2023 compared to 2022 due to, in part, the increased cost~~care. Cost of care and related cost per participant increased for the six months ended December 31, 2023 compared to 2022, partially as a result of increased salaries, wages and benefits associated with increased headcount and higher wage rates ~~third party audit and compliance support,~~ and increased fleet and contract transportation costs due to an increase in ~~average daily attendnace,~~center attendance and external appointments as well as increased costs related to growing census. Additionally, external provider costs have increased in the six month period ended December 31, 2023 compared to 2022 associated with annual increases in assisted living and ~~higher fuel costs.~~nursing facility unit cost and general medical inflation. We ~~expect to experience elevated operating expenses for the remainder of fiscal 2023. We~~will continue to evaluate increased costs and methods to mitigate or offset such ~~costs.~~increases.

~~In March 2023, U.S. regional~~Census and global banks faced liquidity issues. Even though regulatory agencies intervened to stabilize the banking system, there is uncertainty in the markets regarding its continued stability, and regulatory agencies may not intervene in future crises. If the banks and financial institutions at which we, or our payors, hold our cash enter receivership or become insolvent, our liquidity may be threatened. Our cash and cash equivalents balance as of March 31, 2023 consisted of cash held in depository accounts, short-term treasuries, and money-market funds at global money-center banks invested in high-quality, short-term investments. While we do hold some regional bank exposure, such cash allocations are immaterial.

~~Impact of Macroeconomic Conditions and COVID-19~~

~~The COVID-19 pandemic altered the behavior of businesses and people, the effects of which, to some extent, continue on federal, state and local economies.~~capitation revenue. On ~~January 30,~~May 11, 2023 the President ~~announced an intention to allow~~allowed the national emergency and public health emergency declarations related to the COVID-19 pandemic to ~~expire on May 11, 2023.~~expire. While states have resumed processing new Medicaid applications and redeterminations of beneficiary eligibility, the healthcare industry has experienced increased delays in the processing of such applications. The

~~Table of Contents~~

declarations have been in place since early 2020, and in addition to various Congress enacted legislation allowed the federal government flexibility to waive or modify certain requirements in a range of areas, including Medicare and Medicaid. We continue to evaluate how the expiration of these emergency declarations may affect our business outlook.

~~Census and capitation revenue.~~ At this time, we do not believe material census attrition will occur as a result of the expiration of the public health emergency declarations related to COVID-19 and the resumption of Medicaid redetermination.The frailty level of PACE participants coupled with the complexity of Medicaid services needed, result in a comprehensive financial qualifications review compared to the more traditional Medicaid-only population.~~Additionally, throughout the public health emergency, the~~ Company ~~has continued to complete~~completes annual Medicaid redeterminations, ~~with a dedicated team to support these efforts.Our process~~which enables the Company to ~~provide a high degree of service to participants to~~ monitor ongoing eligibility status, assist ~~with~~Participant’s through the redetermination process, address potential issues with eligibility in real time, and track future renewal dates.

~~Expenses. The virus~~ However, as a result of the aforementioned delays, the Company has experienced an increase in gaps of eligibility with redetermination applications. While the participants continue to receive care and remain enrolled with the Company during this time, the effect of such delays temporarily halts Medicaid revenue related to any closed application and simultaneously increases our risk of revenue recovery. In an effort to mitigate these risks, the Company continues to ~~impact older adults, especially those with chronic illnesses, which describes our participants.~~utilize State approved third-party eligibility partners to expedite applications, escalate delayed cases to State administrators, and pursue safe discharges for individuals who are truly ineligible. Being eight months into the public health emergency unwind period, there has not been a material effect on the Company’s financial statements or operations. The ~~United States experienced supply chain issues with respect~~Company is seeing trends of aging report accounts and financial losses normalizing to ~~personal protective equipment (“PPE”) and other medical supplies during~~pre-public health emergency levels. We expect these trends to continue for the height of the pandemic. Global logistics network challenges resulted in higher prices for medical supplies we require. While supply chain disruptions have adversely affected, and may continue to adversely affect, our business and outlook, supply chain disruptions have improved to almost pre-pandemic level during the course of the first nine monthsremainder of fiscal ~~2023. As a result, prices for most medical supplies have normalized.~~year 2024.

Table of Contents

Labor market. The healthcare sector is currently experiencing a complex set of challenges in hiring additional professionals. We believe these challenges are a result of a combination of factors beyond the direct impact of the COVID-19 ~~pandemic~~pandemic. Specifically, the demand for healthcare services has been steadily increasing due to an aging population and ~~continues~~a greater focus on health and wellness in society. In addition, there are systemic challenges related to ~~exacerbate difficulties to hire additional~~workforce training and the pipeline of qualified professionals, which have not kept pace with this growing demand. Furthermore, high inflation experienced during fiscal year 2023 and which has continued through fiscal year 2024 has increased the cost of living, and subsequently, wage pressure for healthcare professionals, ~~causing certain~~with a shift towards an employee-centric market with an emphasis on competitive compensation, flexibility and professional growth opportunities, which has contributed to an increasingly competitive labor market. In an effort to mitigate the effects of ~~our centers~~these challenges, we have adopted strategies to ~~be understaffed or staffed with personnel that requires training. In fiscal year 2022, we experienced workforce and labor shortages, within all~~offer competitive compensation packages. Partially as a result of our centers. This labor pressure has eased slightly during the nine months ended March 31, 2023. While the labor pressure and related costs have eased slightly, the Company continues to be affected by the increased competition and other market trends, in the labor market and market adjustments to increase retention and improve our ability to hire. These adjustments contributed, in part, to an increase in cost of care for the nine months ended March 31, 2023, further impacted by additionalconjunction with increased staffing related to compliance and remediation ~~efforts. This~~efforts in our centers, there has been an increase in ~~conjunction with higher headcount has contributed to increased~~the cost of care for the ~~nine~~six months ended ~~March~~December 31, 2023 compared to the ~~nine months ended March 31, 2022~~comparable period last year, as discussed in ~~“Results~~"Results of ~~Operations”~~Operations" below.

Additionally, on October 13, 2023, California passed into law California Senate Bill No. 525 ("SB 525"), which raises the minimum wage for many California healthcare workers, effective as of June 1, 2024. Although PACE centers are not covered by SB 525, many of our contractors and other third-party providers are impacted by SB 525, and they may renegotiate agreements with our centers to cover their increased labor costs. Additionally, competition with other healthcare providers who are required to increase wages under SB 525 could materially increase our labor costs. We will continue to ~~assess key roles~~evaluate the impact of this legislation on our business.

Finally, on October 27, 2023, following a demand from a labor union for the Company to recognize it as the collective bargaining representative of the nurses and ~~benchmarks~~certified nurse assistants in our Pennsylvania centers, we filed a petition with the National Labor Relations Board to ~~market while monitoring trends~~conduct two elections. The National Labor Relations Board conducted the elections on December 6, 2023, at which the nurses and certified nurse assistants in our Pennsylvania centers voted to unionize. These employees represent approximately 1% of our total workforce. Collective bargaining has not yet commenced. While we cannot predict the terms or timing of any resulting collective bargaining agreement, we currently do not expect the impact from any such future negotiated collective bargaining agreements and costs for unionized employees to have a material effect on our costs of labor ~~market.~~or operations. However, we cannot predict whether other employees will follow a similar course of action.

For additional information on the various risks posed by macroeconomic events, regulation, and ~~the ongoing COVID-19 pandemic,~~employee matters, please see the section entitled “Risk Factors” included in Part I, Item 1A of our ~~2022 10-K.~~2023 10-K and in Part II, Item 1A of this Form 10-Q.

Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by the following factors:

•Our ability to effectively implement post-sanction remediation efforts in our centers as a result of our recent ~~audits.~~audits and maintain high quality of regulatory compliance. The Company’s priority is to continue to remediate the deficiencies raised in audit processes (including recent and new audits) and to implement post-sanction corrective actions, where ~~required.~~required, as well as maintain high quality of regulatory compliance in all its centers. As part of its actions to do so, the Company has worked with the appropriate authorities to make the necessary changes within the Company to ~~increase~~improve care coordination and care documentation among our centers, including working to fill critical personnel gaps at our centers, standardizing the process of our Interdisciplinary Care Teams (“IDTs”), strengthening our home care network and reliability, improving timelines of scheduling and coordinating care with providers outside our centers, among others. ~~See “Audit Processes and Remediation Efforts” below.~~

•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 manage a higher acuity population, with an average risk adjustment factor (“RAF”) score of ~~2.53~~2.42 based on InnovAge data as of ~~March~~December 31, 2023; and (ii) we manage Medicaid spend in addition to Medicare. Our

Table of Contents

participants are managed on a capitated, or at-risk basis, where InnovAge is financially responsible for all of participant medical costs. Our comprehensive care model and globally capitated payments are designed to

~~Table of Contents~~

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, ontaking into account the underlying medical conditions and frailty of each participant. We continue to work on expanding payer capabilities so that our revenue more accurately reflects the acuity of the populations we serve.

•Our ability to grow enrollment and capacity within existing centers. We believe all seniors should have access to the type of all-inclusive care offered by the PACE model. Several factors can affect our ability to grow enrollment and capacity within existing centers, including sanctions issued by ~~regulators.~~regulators, such as the ones we were subject to in our Sacramento, California and Colorado centers.

•Our ability to maintain high participant satisfaction and retention. We achieved a ~~74%~~86% participant satisfaction rating as of ~~January 1,~~September 30, 2023, measured as composite of participant satisfaction across ten categories, and average participant tenure was 3.2 years as of ~~March~~December 31, 2023, measured as tenure from enrollment to disenrollment, among our centers that have been operated by us for at least five years. Furthermore, we experience low levels of voluntary disenrollment, averaging ~~5.7%~~5.9% annually over the last three fiscal years. Approximately ~~75%~~71% of our historical disenrollments have been involuntary, due primarily to participant death or otherwise due to participants moving out of our service areas.

•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. ~~Because our~~Our participants are among the most frail and medically complex individuals in the U.S. healthcare system, and average acuity rises with the passage of time. The risk pool of our population became more acute in fiscal year 2023 as we were not able to replenish our population mix with newer, lower-acuity participants as a result of State sanctions, and as a result, our external provider costs and cost of care, excluding depreciation and amortization, represented approximately ~~86%~~84% of our revenue in the ~~nine~~six months ended ~~March~~December 31, 2023. While we are liable for potentially large medical claims, our care model focuses on delivering high-quality medical care in cost efficient, community-based settings as a means of avoiding costly inpatient and outpatient services. However, our participants retain the freedom to seek care at sites of their choice, including hospitals and emergency rooms; we do not restrict participant access to care.

•Center-level Contribution Margin. As we serve more participants in existing centers, we leverage our fixed cost base at those centers and the value of a center to our business increases over time. The enrollment sanctions in Sacramento, California and Colorado limited our ability to grow our participant census and ~~impact~~impacted Center-level Contribution Margin in fiscal 2022 and the first half of fiscal 2023. We were fully released from those sanctions in Colorado in January 2023 and in California in May 2023. The Company continues post-sanction monitoring, and is currently able to enroll new participants at all of its centers. For the six months ended December 31, 2023, census has grown 1.2% compared to the six months ended December 31, 2022.

•Our ability to expand via ~~acquisition or~~ de novo centers within existing and new markets. Several factors can affect our ability to open de novo centers, including sanctions issued by regulators, ~~opening costs~~such as the ones imposed on our Sacramento, California and ~~availability~~Colorado centers in 2021. As a result of ~~qualified and trained personnel.~~ such sanctions, we were precluded from, or voluntarily suspended efforts to, open de novo centers.

On January ~~7, 2022, the Department of Health Care Services ("DHCS") of the State of California notified us that it was suspending the State’s previously provided assurances that it would enter into~~1, 2024, we opened a PACE program agreement with the Company ("State Attestations") with respect to de novo centers in the State of California until such time as the corrective action plans (“CAPs”) and the remediation and validation processes for our Sacramento center have been successfully completed and the enrollment sanctions are lifted. In addition, on February 9, 2022, we received notice from the Cabinet for Health and Family Services of the State of Kentucky informing us that they no longer intend to enter into an agreement with us to be a PACE provider in the State of Kentucky. On February 14, 2022, CMS denied our application to develop the previously announced PACE center in ~~Terre Haute, Indiana,~~Tampa, Florida, which ~~was projected~~has opened enrollment to ~~open in fiscal year 2024 based on deficiencies detected during CMS’ 2021 audits of~~various surrounding counties, and continue our ~~Sacramento and Colorado PACE programs. In Florida, we are moving forward with pursuit of~~efforts to obtain the licensure required to open a PACE center in ~~each~~Orlando, Florida.

All new PACE centers are subject to annual federal and state audits for the first three years after opening. In October 2023, CMS and the California Department of ~~Tampa~~Health Care Services (“DHCS) conducted a joint routine audit of our Sacramento center. On December 27, 2023, we received the final audit report from CMS for which we submitted a routine corrective action plan (CAP) that follows every audit. On January 22, 2024, CMS approved that CAP. On January 23, 2024, DHCS notified us of their preliminary audit findings at our Sacramento center and ~~Orlando, with the~~that, based on concerns that it had been alerted to, it will be conducting a medical

Table of Contents

review of our San Bernardino center. In response to both of these matters, DHCS notified us that it is suspending its attestations in support of the ~~Florida Agency for Health Care Services~~planned de novo center in Downey and ~~CMS.~~the recently acquired planned de novo center in Bakersfield. On February 1, 2024, we received the final audit results from DHCS notifying us of identified deficiencies at our Sacramento center, some of which fall under the same categories as those that formed the basis of the enrollment freeze in 2021. While these 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. We believe we have in place the policies, processes and systems to correct the identified deficiencies as we did in connection with the 2021 enrollment freeze.

•Execute tuck-in acquisitions. From fiscal year 2019 through fiscal year 2021, we acquired and integrated three PACE organizations, expanding our InnovAge Platform to one new state and four new markets through those acquisitions. Additionally, in the second fiscal quarter of 2024, we completed an acquisition of two PACE programs in California from ConcertoCare, which included one operating center in the Crenshaw neighborhood of Los Angeles and a second program in the process of its application for licensure in Bakersfield, California. We ~~are~~remain disciplined in our approach to acquisitions and in the past have executed multiple types of transactions, including turnarounds and non-profit conversions. ~~Historically, when~~When integrating acquired programs, we ~~worked~~work closely with key constituencies, including local governments, health systems and senior housing providers, to enable continuity of high-quality care for participants. ~~Once restrictions on our ability to open de novo centers are lifted or resolved, we intend to resume execution of tuck-in acquisitions.~~

•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

~~Table of Contents~~

markets. Maintaining, supporting and growing these relationships in existing markets as well as new geographies, is critical to our long-term success.

•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 and due to additional costs we are incurring ~~and~~or expect to incur as a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of Nasdaq, additional corporate and director and officer insurance, investor relations and increased legal, audit, reporting and consulting fees. We also expect to incur additional expenses for the foreseeable future in connection with our current and future audits to our centers, our post-audit 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. We are building capabilities to increase our sophistication as a payor to drive clinical value, improve outcomes, and manage cost trends. Accordingly, in the short term, we expect the activities noted above 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.

•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 virus, being more prevalent during colder months of the year, which generally increases per-participant costs, specifically in 2024, we expect to see some increase in inpatient and short stay nursing home utilization as well as increased acuity of our participant mix; 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 by CMS, which is based on CMS’s determination of a participant’s ~~Risk Adjustment Factor~~RAF score as measured twice per year and is based on the evolving acuity of a participant. ~~Based on the~~Where there is a difference between our estimate and the final determination from CMS, we may receive incremental ~~true up~~true-up revenue or be required to repay certain amounts. 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.

~~Audit Processes and Remediation Efforts~~

We are routinely subject to, and will continue to be subject to, various governmental inspections, reviews and audits. Set forth below is a summary of the ongoing audits at our centers and updates on such audit processes.

~~Colorado.~~ On January 23, 2023, both CMS and Colorado Department of Health Care Policy & Financing (“HCPF”) released enrollment sanctions for all Colorado centers and normal enrollment since resumed. CMS and HCPF require that we conduct post-sanction corrective action and monitoring activities to address any issues identified during the validation audits.

~~California.~~ Effective November 21, 2022, CMS released the enrollment sanction for Medicare-eligible participants, and effective May 1, 2023, the DHCS released the state sanction. CMS and DHCS are requiring the Company to conduct post-sanction corrective action and monitoring activities to address any issues identified during the validation audits. The release of both CMS and DHCS sanctions permits the Company to resume normal enrollment of eligible seniors into its PACE program at its Sacramento, California center.

~~In January 2022, DHCS notified us that it was suspending the State Attestations with respect to de novo centers in the State of California until such time as its enrollment sanctions are lifted.~~

~~New Mexico.~~ ~~On April 14, 2023, CMS closed the audit that it had begun in November 2021.~~

~~Kentucky, Indiana and Florida~~. The States of Kentucky and Indiana have taken actions to suspend our ability to open de novo centers in those states. In Florida, we are moving forward with pursuit of licensure required to open a PACE center in each of Tampa and Orlando, with the support of the Florida Agency for Health Care Services and CMS.

The Company’s priority is to return to growth as a company, both for the short- and long-term. We continue to work with the appropriate authorities to make the necessary changes within the Company to increase care coordination and care documentation among our centers.

3132

Table of Contents

Components of Results of Operations

Revenue

Capitation Revenue. In order to provide comprehensive services to manage the totality of a participant’s medical care across all settings, we receive fixed or capitated fees per participant that are paid monthly by Medicare, Medicaid, Veterans Affairs (“VA”) and private pay sources.

Medicaid and Medicare capitation revenues are based on PMPM capitation rates under the PACE program. The PACE state contracts between us and the respective state Medicaid administering agency are amended annually each June 30 in all states other than California and Pennsylvania, which contract on a calendar-year basis. New amendments have been executed for the periods (i) January 1, 2021 through December 31, 2025 for California and (ii) July 1, 2022 through June 30, 2023 for all other states, except Pennsylvania, for which weWe are currently operating in good standing under ~~the 2020 amended agreement while the agency finalizes its current amendment.~~each of our PACE state contracts. For a discussion of our revenue recognition policies, please see Critical Accounting Estimates below and Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in our ~~2022~~2023 10-K.

Other Service Revenue. Other service revenue primarily consists of revenues derived from fee-for-service arrangements, state food grants, rent revenues and management fees. Prior to June 30, 2022, we generated fee-for-service revenue from providing home-care services to non-PACE patients in their homes, for which we billed the patient or their insurance plan on a fee-for-service basis. We no longer offer in-home care ~~services.~~services to non-PACE participants. For a discussion of our revenue recognition policies, please see Critical Accounting Estimates below and Note 2, “Summary of Significant Accounting Policies” to our consolidated financial statements included in our ~~2022~~2023 10-K.

Operating Expenses

External Provider Costs. External provider costs consist primarily of the costs for medical care provided by non-InnovAge providers. We separate external provider costs into four categories: inpatient (e.g., hospital), housing (e.g., assisted living and skilled nursing facility), outpatient and pharmacy. In aggregate, external provider costs represent the largest portion of our expenses.

Cost of Care, Excluding Depreciation and Amortization. Cost of care, excluding depreciation and amortization, includes the costs we incur to operate our care delivery model. This includes costs related to salaries, wages and benefits for IDT and other center-level staff, participant transportation, medical supplies, occupancy, insurance and other operating costs. IDT employees include medical doctors, registered nurses, social workers, physical, occupational, and speech therapists, nursing assistants, and transportation workers. Other center-level employees include clinic managers, dieticians, activity assistants and certified nursing assistants. Cost of care excludes any expenses associated with sales and marketing activities incurred at a local level as well as any allocation of our corporate, general and administrative expenses. A portion of our cost of care, including our employee-related costs, is directly related to the number of participants cared for in a center. The remainder of our cost of care is fixed relative to the number of participants we serve, such as occupancy and insurance expenses. As a result, as revenue increases due to census growth, cost of care, excluding depreciation and amortization, moderately decreases as a percentage of revenue. As we open new centers, we expect cost of care, excluding depreciation and amortization, to increase in absolute dollars due to higher census and facility related costs.

Sales and Marketing. Sales and marketing expenses consist of employee-related expenses, including salaries, commissions, and employee benefits costs, for all employees engaged in marketing, sales, community outreach and sales support. These employee-related expenses capture all costs for both our field-based and corporate sales and marketing teams. Sales and marketing expenses also include local and centralized advertising costs, as well as the infrastructure required to support our marketing efforts. We expect these costs to increase in absolute dollars over time as we grow our participant census. We evaluate our sales and marketing expenses relative to our participant growth and will invest more heavily in sales and marketing from time-to-time to the extent we believe such investment can accelerate our growth without negatively affecting profitability.

Corporate, General and Administrative. Corporate, general and administrative expenses include employee-related expenses, including salaries and related costs. In addition, general and administrative expenses include all corporate technology and occupancy costs associated with our corporate office. We expect our general and administrative expenses to increase in absolute dollars due to the additional legal, accounting, insurance, investor relations and other costs that we incur as a public company, as well as other costs associated with compliance and continuing to grow our business. However, we anticipate

~~Table of Contents~~

general and administrative expenses to decrease as a percentage of revenue over the long term,

Table of Contents

although such expenses may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

Depreciation and Amortization. Depreciation and amortization expenses are primarily attributable to our buildings and leasehold improvements and our equipment and vehicles. Depreciation and amortization are recorded using the straight-line method over the shorter of estimated useful life or lease terms, to the extent the assets are being leased.

For more information relating to the components of our results of operations, see Results of Operations below and Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements included in our ~~2022~~2023 10-K.

Results of Operations

The following table sets forth our consolidated results of operations for the periods presented:


		Three Months Ended March 31,				Nine Months Ended March 31,
	Three Months Ended December 31,												Three Months Ended December 31,		Six Months Ended December 31,
in thousands	in thousands	2023		2022		2023		2022		in thousands	2023	2022		2023		2022
Revenues	Revenues
Capitation revenue
Capitation revenue
Capitation revenue	Capitation revenue	$	172,196	$	176,988	$	510,268	$	524,507
Other service revenue	Other service revenue	343		371		945		1,273
Total revenues	Total revenues	172,539		177,359		511,213		525,780
Expenses	Expenses
External provider costs
External provider costs
External provider costs	External provider costs	89,805		103,254		279,550		284,299
Cost of care, excluding depreciation and amortization	Cost of care, excluding depreciation and amortization	53,949		46,102		158,881		129,740
Sales and marketing	Sales and marketing	5,314		6,144		13,502		19,117
Corporate, general and administrative	Corporate, general and administrative	27,648		24,682		86,646		74,248
Depreciation and amortization	Depreciation and amortization	3,992		3,850		11,087		10,435
Total expenses	Total expenses	180,708		184,032		549,666		517,839
Operating Income (Loss)		$	(8,169)	$	(6,673)	$	(38,453)	$	7,941
Operating Loss

Other Income (Expense)	Other Income (Expense)
Other Income (Expense)
Other Income (Expense)
Interest expense, net	Interest expense, net	(405)		(709)		(1,231)		(1,930)
Other income (expense)		(101)		108		380		(358)
Interest expense, net
Interest expense, net
Other income
Other expense
Total other expense	Total other expense	(506)		(601)		(851)		(2,288)
Income (Loss) Before Income Taxes		(8,675)		(7,274)		(39,304)		5,653
Loss Before Income Taxes
Provision (Benefit) for Income Taxes	Provision (Benefit) for Income Taxes	(1,365)		(4,116)		(7,747)		81
Net Income (Loss)		$	(7,310)	$	(3,158)	$	(31,557)	$	5,572
Net Loss
Less: net loss attributable to noncontrolling interests	Less: net loss attributable to noncontrolling interests	(680)		(337)		(2,061)		(616)
Net Income (Loss) Attributable to InnovAge Holding Corp.		$	(6,630)	$	(2,821)	$	(29,496)	$	6,188
Net Loss Attributable to InnovAge Holding Corp.

Revenues

Three Months Ended March 31, Change Nine Months Ended March 31, Change
2023 2022 $ % 2023 2022 $ %
in thousands
Capitation revenue $ 172,196 $ 176,988 $ (4,792) (2.7) % $ 510,268 $ 524,507 $ (14,239) (2.7) %
Other service revenue 343 371 (28) (7.5) % 945 1,273 (328) (25.8) %
Total revenues $ 172,539 $ 177,359 $ (4,820) (2.7) % $ 511,213 $ 525,780 $ (14,567) (2.8) %

~~Capitation revenue.~~ Capitation revenue was $172.2 million for the three months ended March 31, 2023 a decrease of $4.8 million, or 2.7%, compared to $177.0 million for the three months ended March 31, 2022. This decrease was driven


	Three Months Ended December 31,				Change				Six Months Ended December 31,				Change
	2023		2022		$		%		2023		2022		$		%
in thousands
Capitation revenue	$	188,561	$	167,140	$	21,421	12.8	%	$	370,734	$	338,071	$	32,663	9.7	%
Other service revenue	337		316		21		6.6	%	648		603		45		7.5	%
Total revenues	$	188,898	$	167,456	$	21,442	12.8	%	$	371,382	$	338,674	$	32,708	9.7	%

3334

Table of Contents

Capitation revenue. Capitation revenue was $188.6 million for the three months ended December 31, 2023 an increase of $21.4 million, or 12.8%, compared to $167.1 million for the three months ended December 31, 2022. This increase was driven by a ~~7.6% decrease in member months partially offset by a 5.3%~~$15.8 million, or 9.1%, increase in capitation ~~rates. The decrease~~rates coupled with $5.6 million, or 3.4%, increase in member months is primarily due to disenrollments and our inability to enroll new participants at our Sacramento, California center as a result of sanctions, minimally offset by the ramp up of enrollments at our Colorado centers as we resumed the enrollment process.months. The increase in capitation rates was primarily driven by an(i) a 7.0% annual increase in ~~both~~ Medicaid capitation rates as determined by the States and (ii) an 11.8% increase in Medicare capitation rates as a result of increased risk score and county rates ~~partially offset by~~coupled with a one-time true up outside of the ~~reinstatement of sequestration.~~regular payment cycle. The increase in member months is primarily due to the release from sanctions at our Colorado and Sacramento centers.

Capitation revenue was ~~$510.3~~$370.7 million for the ~~nine~~six months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$14.2~~$32.7 million, or ~~2.7%,~~9.7% compared to ~~$524.5~~$338.1 million for the ~~nine~~six months ended ~~March~~December 31, 2022. This ~~decrease~~increase was driven by a ~~7.1% decrease in member months partially offset by a 4.7%~~$28.7 million, or 8.4%, increase in capitation rates ~~primarily due to the factors discussed above.~~coupled with a $3.9 million, or 1.2%, increase in member months. The increase in capitation rates include a 6.9% annual increase in Medicaid rates and a 10.3% increase in Medicare rates.

Operating Expenses


		Three Months Ended March 31,				Change				Nine Months Ended March 31,				Change
		2023		2022		$		%		2023		2022		$		%
	Three Months Ended December 31,																								Three Months Ended December 31,								Change									Six Months Ended December 31,										Change
	2023																				2023					2022					$						%					2023					2022						$					%
in thousands	in thousands
External provider costs
External provider costs
External provider costs	External provider costs	$	89,805	$	103,254	$	(13,449)	(13.0)%		$	279,550	$	284,299	$	(4,749)	(1.7)%		$	100,964			$	93,507				$	7,457				8.0%						$	200,322				$	189,744				$	10,578					5.6%
Cost of care (excluding depreciation and amortization)	Cost of care (excluding depreciation and amortization)	53,949		46,102		7,847		17.0%		158,881		129,740		29,141		22.5%		Cost of care (excluding depreciation and amortization)		54,321				51,376					2,945					5.7%						109,570					104,933					4,637					4.4%
Sales and marketing	Sales and marketing	5,314		6,144		(830)		(13.5)	%	13,502		19,117		(5,616)		(29.4)	%	Sales and marketing		5,859				3,774					2,085	55.2					55.2	%					11,237					8,187					3,050		37.3			37.3	%
Corporate, general, and administrative	Corporate, general, and administrative	27,648		24,682		2,966		12.0%		86,646		74,248		12,398		16.7%		Corporate, general, and administrative		25,249				28,817					(3,568)					(12.4)%						54,197					58,999					(4,802)					(8.1)%
Depreciation and amortization	Depreciation and amortization	3,992		3,850		142		3.7%		11,087		10,435		652		6.2%		Depreciation and amortization		4,290				3,662					628					17.1%						8,559					7,095					1,464					20.6%
Total operating expenses	Total operating expenses	$	180,708	$	184,032	$	(3,324)			$	549,666	$	517,839	$	31,827

External provider costs. External provider costs were ~~$89.8~~$101.0 million for the three months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$13.4~~$7.5 million, or ~~13.0%~~8.0%, compared to ~~$103.3~~$93.5 million for the three months ended ~~March~~December 31, 2022. The ~~decrease~~increase was primarily driven by ~~a decrease~~an increase of ~~$7.9~~$4.3 million, or ~~7.6%, in member months coupled with a decrease of $5.6 million, or 5.9%~~4.4%, in cost per ~~participant.~~participant coupled with an increase of $3.2 million, or 3.4% in member months. The ~~decrease~~increase in cost per participant was primarily driven by ~~a $3.6 million decrease associated with lower inpatient~~an annual increase in pharmacy cost, ~~per admit as a result of the Omicron spike in the prior year and a $1.3 million net decrease associated with lower short stay skilled nursing facility utilization partially offset by~~ an increase in assisted living utilization and unit cost, and an increase in outpatient services utilization. This was partially offset by a decrease in permanent nursing facility ~~utilization and unit cost.~~utilization.

External provider costs were ~~$279.5~~$200.3 million for the ~~nine~~six months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$4.7 million,~~$10.6, or ~~1.7%~~5.6%, compared to ~~$284.3 million~~$189.7 for the ~~nine~~six months ended ~~March~~December 31, 2022. ~~The decrease is~~This increase was primarily driven ~~by a decrease of $20.2 million, or 7.1%, in member months partially offset~~ by an increase of ~~$15.4~~$8.4 million, or ~~5.8%~~4.4%, in cost per ~~participant.~~participant coupled with an increase of $2.2 million, or 1.2%, in member months. The increase in cost per participant iswas primarily driven by ~~a $13.3 million~~an annual increase ~~associated with increased~~in pharmacy cost, an increase in assisted living ~~and nursing facility~~ utilization and unit cost, and an increase in outpatient services utilization. This is partially offset by a ~~$3.0 million reduction~~decrease in ~~inpatient cost per admit associated with fewer COVID admissions.~~permanent and short stay nursing facility utilization.

Cost of care (excluding depreciation and amortization). Cost of care (excluding depreciation and amortization) expense was ~~$53.9~~$54.3 million for the three months ended ~~March~~December 31, 2023, an increase of ~~$7.8~~$2.9 million, or ~~17.0%~~5.7%, compared to ~~$46.1~~$51.4 million for the three months ended ~~March~~December 31, 2022, primarily due to an increase of ~~$11.4~~$1.2 million, or ~~26.7%~~2.3%, in cost per participant ~~partially offset by a decrease~~coupled with an increase of ~~$3.5~~$1.7 million, or ~~7.6%~~3.4%, in member months. The increase was primarily driven by (i) a ~~$6.2~~$3.1 million increase in salaries, wages and benefits associated with increased headcount and higher wage rates, ~~due to the ongoing competitive labor market,~~ (ii) ~~$0.8 million in third party audit and compliance support, (iii) $0.7~~$0.9 million in increased building maintenance and security, and ~~(iv)~~(iii) $0.4 million in increased fleet expense and contract transportation a result of ~~higher average daily~~an increase in center attendance and an increase in external ~~appointments.~~appointments, partially offset by $1.0 million reduction in third party audit and compliance support.

Cost of care (excluding depreciation and amortization) expense was ~~$158.9~~$109.6 million for the ~~nine~~six months ended ~~March~~December 31, 2023, an increase of ~~$29.1~~$4.6 million, or ~~22.5%~~4.4%, compared to ~~$129.7~~$104.9 million for the ~~nine~~six months ended ~~March~~December 31, 2022, primarily due to an increase of ~~$38.4~~$3.4 million, or ~~31.8%~~3.2%, in cost per participant ~~partially offset by a decrease~~coupled with an increase of ~~$9.2~~$1.2 million, or ~~7.1%~~1.2%, in member months. The increase was primarily driven by (i) a ~~$19.4~~$4.5 million increase in salaries, wages and benefits associated with increased headcount and ~~higher~~ wage ~~rates due to the ongoing competitive labor market,~~rate, (ii) ~~$3.5~~$1.5 million in increased building maintenance and security, and (iii) $1.8 million in increased fleet expense as a result of an increase in center attendance and an increase in external appointments, partially offset by $2.5 million reduction in third party audit and compliance ~~support, (iii) $3.0 million in increased fleet expense and contract transportation as a result of higher average daily attendance, increase in external appointments, and higher fuel costs, (iv)~~support.

3435

Table of Contents

~~$1.5 million in increased building maintenance and security and (v) $0.7 million in de novo costs due primarily to rent expense.~~

Sales and marketing. Sales and marketing expenses were ~~$5.3~~$5.9 million for the three months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$0.8~~$2.1 million, or ~~13.5%~~55.2%, compared to ~~$6.1~~$3.8 million for the three months ended ~~March~~December 31, 2022, primarily due to ~~a $0.6 million reduction in costs associated with fewer sales~~increased marketing spend and headcount as a result of ~~sanctions~~the sanction release in our Colorado and Sacramento ~~centers partially offset by $0.4 million in one-time costs related to organizational realignment recorded during the three months ended March 31, 2022.~~centers.

Sales and marketing ~~expenses~~expense were ~~$13.5~~$11.2 million for the ~~nine~~six months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$5.6~~$3.1 million, or ~~29.4%~~37.3%, compared to ~~$19.1~~$8.2 million for the ~~nine~~six months ended ~~March~~December 31, 2022, primarily due to ~~(i) a $2.8 million reduction in~~increased marketing spend and ~~$2.0 million reduction in costs associated with fewer~~ headcount ~~within the sales department, both~~ as a result of ~~sanctions~~the sanction release in our Colorado and Sacramento ~~centers and (ii) a $0.9 million reduction in sales commissions expense due to the deferral of commissions.~~centers.

Corporate, general and administrative. Corporate, general and administrative expenses were ~~$27.6~~$25.2 million for the three months ended ~~March~~December 31, 2023, ~~an increase~~a decrease of ~~$3.0~~$3.6 million, or ~~12.0%~~12.4%, compared to ~~$24.7~~$28.8 million for the three months ended ~~March~~December 31, 2022. The ~~increase~~decrease was primarily due to (i) a ~~$2.7~~$2.9 million reduction in third party legal expense, (ii) a $0.6 million reduction in insurance expense, (iii) a $1.3 million reduction in consulting expense associated with improving organizational capabilities including the transition to a new electronic medical record ("EMR") system, (iv) $1.0 million reduction in contract staff augmentation, and (iv) $0.9 million reduction in recruiting expense. These decreases in cost were partially offset by (i) $1.5 million increase in employee compensation and benefits as the result of an increase in headcount to support compliance and bolster organizational capabilities, (ii) ~~$2.7~~$1.1 million ~~in third party legal costs, and (iii) a $2.1 million increase in software license and maintenance expense. These increases in cost are partially offset by (i) a $1.9 million reduction~~ in bad debt expense, and (iii) $0.3 million in license fees.

Corporate, general and administrative expenses were $54.2 million for the six months ended December 31, 2023, a decrease of $4.8 million, or 8.1%, compared to $59.0 million for the six months ended December 31, 2022. This decrease was primarily due to (i) a $2.7 million reduction in third party legal expense, (ii) ~~a $1.0~~$1.2 million reduction in insurance expense, (iii) $2.9 million reduction in consulting expense associated with improving organizational ~~capabilities.~~

~~Corporate, general~~capabilities including the transition to a new EMR, (iv) $1.2 million reduction in contract staff augmentation, and ~~administrative expenses~~(v) $1.4 million reduction in recruiting expense. These decreases were ~~$86.6 million for the nine months ended March 31, 2023, an increase of $12.4 million, or 16.7%, compared to $74.2 million for the nine months ended March 31, 2022. The increase was primarily due to~~partially offset by (i) a ~~$7.8~~$2.1 million increase in employee compensation and benefits as the result of an increase in headcount, ~~to support compliance and bolster organizational capabilities,~~ (ii) ~~$6.4~~$0.6 million in ~~third party~~bad debt expense, (iii) $0.5 million in consulting costs associated with ~~implementing our core provider initiatives, assessing our risk-bearing payor capabilities,~~Sarbanes-Oxley Act of 2002 compliance and ~~strengthening organizational capabilities including the transition to a new electronic medical record ("EMR"), (iii) $3.5 million in increased legal spend,~~internal audit. and (iv) ~~$3.2~~$1.2 million ~~increase~~ in software license and maintenance ~~expense. These increases in cost were partially offset by (i) a $2.5 million reduction in bad debt~~ expense, ~~and (ii) $4.1 million in executive severance and recruiting recognized during the nine months ended March 31, 2022.~~inclusive of Epic license fees.

Other Income (Expense)


		Three Months Ended March 31,				Change			Nine Months Ended March 31,				Change
		2023		2022		$		%	2023		2022		$		%
	Three Months Ended December 31,																					Three Months Ended December 31,					Change					Six Months Ended December 31,						Change
	2023																		2023				2022			$			%			2023			2022				$		%
in thousands	in thousands
Interest expense, net	Interest expense, net	$	(405)	$	(709)	$	304	(42.8)%	$	(1,231)	$	(1,930)	$	699	(36.2)%
Other income (expense)		(101)		108		(209)		(193.3)%	380		(358)		738		(206.1)%
Interest expense, net
Interest expense, net																	$	(935)		$	(223)			$	(712)			319.3%		$	(1,596)		$	(826)		$	(770)			93.2%
Other income																Other income	874			444				430				96.8%		1,517			480			1,037				216.0%
Other expense																Other expense	$	(1,882)		$	—			$	(1,882)			100.0%		$	(1,882)		$	—		$	(1,882)			100.0%
Total other expense	Total other expense	$	(506)	$	(601)	$	95		$	(851)	$	(2,288)	$	1,437

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 ~~$0.4~~$0.9 million for the three months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$0.3~~$0.7 million, or ~~42.8%~~319.3%, compared to ~~$0.7~~$0.2 million for the three months ended ~~March~~December 31, 2022. The ~~decrease~~increase was primarily due to interest income of ~~$1.0~~$0.9 million from money market funds offsetting interest expense of ~~$1.4~~$1.8 million for the three months ended ~~March~~December 31, 2023. Interest expense of $1.1 million was offset by interest income of $0.8 million during the three months ended ~~March~~December 31, ~~2022 was negligible.~~2022.

Interest expense, net was ~~$1.2~~$1.6 million for the ~~nine~~six months ended ~~March~~December 31, 2023, ~~a decrease~~an increase of ~~$0.7~~$0.8 million, or ~~36.2%~~93.2%, compared to ~~$1.9~~$0.8 million for the ~~nine~~six months ended ~~March~~December 31, 2022. ~~The decrease was primarily~~This increase is due to interest expense of $3.6 million offset by interest income of ~~$2.3~~$2.0 million from money market ~~funds offsetting~~accounts during the six months ended December 31, 2023. During the six months ended December 31, 2022, interest expense of ~~$3.5~~$2.1 million ~~during the nine months ended March 31, 2023. Interest~~was offset by interest income during the nine months ended March 31, 2022 was negligible. For additional information regarding our outstanding indebtedness, see Note 8, “Long-Term Debt” to our condensed consolidated financial statements.

~~Table~~ of ~~Contents~~

$1.2 million.

Other ~~income (expense).~~income. 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 ~~(expense)~~ for the three months ended ~~March~~December 31, 2023 ~~decreased $0.2~~increased $0.4 million, or ~~193.3%~~96.8%, when compared to the three months ended ~~March~~December 31, 2022. The ~~decrease is~~increase was primarily due to ~~a loss~~dividends received from our short-term investments of $0.6 million ~~related~~for the three months ended December 31, 2023 compared to ~~the termination~~dividends of the Germantown, Pennsylvania center lease upon consolidation of the center with other centers, offset by the recognition of $0.4 million in unrealized gains related to short-term investments. Other income (expense) was income of $0.4$0.2 million for the ~~nine~~three months ended ~~March~~December 31, 2022.

Table of Contents

Other income was $1.5 million for the six months ended December 31, 2023, an increase of ~~$0.8~~$1.0 million, or ~~206.0%~~216.0%, compared to ~~a loss of $0.4~~$0.5 million for the ~~nine~~six months ended ~~March~~December 31, 2022. ~~The~~This increase iswas primarily due to ~~the recognition~~dividends received of unrealized gains on short-term investments of $0.8 million offset by a loss of $0.6 million due to the termination of the Germantown center lease during the nine months ended March 31, 2023 in addition to the recognition of a loss on disposal of assets of $0.4$1.2 million during the ~~nine~~six months ended ~~March~~December 31, ~~2022 related~~2023 compared to dividends of $0.2 million for the ~~write off~~six months ended December 31, 2022.

Other expense. Other expense was $1.9 million for the three and six months endedDecember 31, 2023, an increase of ~~certain assets~~$1.9 million, or 100.0%, compared to zero for the three and six months ended December 31, 2022. Subsequent to December 31, 2023, we noted indicators of impairment in ~~conjunction with a move to a new facility at~~ our ~~Roanoke, Virginia center.~~minority equity investment of Jetdoc. We determined that indicators were present as of the reporting date, and recognized impairment losses of $1.9 million during the three and six months ended December 31, 2023. No observable price changes or impairments were recorded during the three and six months ended December 31, 2022.

Provision for Income Taxes

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 ~~SH1~~InnovAge Senior Housing Thornton, LLC ("SH1") and InnovAge Sacramento have elected to be taxed as partnerships, and no provision for income taxes for SH1 or InnovAge Sacramento is included in these condensed consolidated financial statements.

A valuation allowance is provided to the extent that it is more likely than not that deferred tax assets will not be realized. Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon examination based on the technical merits of the position. The amount recognized is measured as the largest amount of benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalty expense associated with uncertain tax positions as a component of provision for income taxes.

During the three months ended ~~March~~December 31, 2023 and 2022, we reported ~~benefit for income taxes of $1.4 million and $4.1 million, respectively. During the nine months ended March 31, 2023 and 2022, we reported benefit for income taxes of $7.7 million and a~~ provision for income taxes of $0.1 million and benefit of $2.9 million, respectively. During the six months ended December 31, 2023 and 2022, we reported a provision for income taxes of $0.3 million and benefit of $(6.4) million, respectively. The decrease of ~~$7.8~~$6.7 million is primarily due (i) our pretax book loss recognized during the ~~nine~~six months ended ~~March~~December 31, 2023, as compared to pretax book ~~income~~loss recognized during the ~~nine~~six months ended ~~March~~December 31, 2022 and (ii) ~~certain permanent differences between~~ the financial and tax accounting treatment of (a) the Section 162(m) limitation on compensation of five highest paid officers, (b) income from entities not subject to tax, and (c) disallowed stock options related to profit unit interests.change in our valuation allowance.

Net Loss Attributable to Noncontrolling Interests.

~~InnovAge Senior Housing Thornton, LLC (“SH1”)~~SH1 is a Variable Interest Entity (“VIE”). The Company is the primary beneficiary of SH1 and consolidates SH1. The Company is the primary beneficiary of SH1 because it has the power to direct the activities that are most significant to SH1 and has an obligation to absorb losses or the right to receive benefits from SH1. The most significant activity of SH1 is the operation of the housing facility. The Company has provided a subordinated loan to SH1 and has provided a guarantee for the convertible term loan held by SH1. The SH1 interest is reflected within equity as noncontrolling interests. Our share of earnings ~~are~~is recorded in the consolidated ~~statements~~Statements of ~~operations and the share of the other noncontrolling interest holders’ earnings are recorded as net loss attributable to noncontrolling interests.~~

~~Our share of earnings are recorded in the consolidated statements of operations~~Operations and the share of the other noncontrolling interest holders’ earnings are recorded as net loss attributable to noncontrolling interests.

Net ~~Income (Loss)~~Loss

During the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, we reported net ~~income (loss)~~loss of ~~($31.6 million)~~$14.8 million and ~~$5.6~~$24.2 million, respectively, consisting of (i) ~~income (loss)~~loss from operations of ~~($38.5 million)~~$12.5 million and ~~$7.9~~$30.3 million, respectively, (ii) other expense of ~~$0.9~~$2.0 million and ~~$2.3~~$0.3 million, respectively, and (iii) a ~~benefit~~provision for income taxes of ~~$7.7~~$0.3 million and ~~provision~~benefit of ~~$0.1~~$6.4 million, respectively, each as described above.

~~Table of Contents~~

Key Business Metrics and Non-GAAP Measures

In addition to our GAAP financial information, we review a number of operating and financial metrics, including the following key metrics and non-GAAP measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. We believe these metrics provide additional perspective and insights when analyzing our core operating performance from period to period and evaluating trends in

Table of Contents

historical operating results. These key business metrics and non-GAAP measures should not be considered superior to, or a substitute for, and should be read in conjunction with, the GAAP financial information presented herein. These measures may not be comparable to similarly-titled performance indicators used by other companies.


		Nine months ended March 31,
		2023			2022
		dollars in thousands
	Six months ended December 31,													Six months ended December 31,
	2023										2023				2022
	dollars in thousands													dollars in thousands
Key Business Metrics:	Key Business Metrics:
Centers(a)
Centers(a)
Centers(a)	Centers(a)	17			18			18				18
Census(b)	Census(b)	6,310			6,800			Census(b)	6,780				6,460
Total Member Months(b)	Total Member Months(b)	58,270			62,730			Total Member Months(b)	39,670				39,210

Center-level Contribution Margin	Center-level Contribution Margin	$	72,782		$	111,741
Center-level Contribution Margin
Center-level Contribution Margin
Center-level Contribution Margin as a % of revenue	Center-level Contribution Margin as a % of revenue	14.2		%	21.3		%	Center-level Contribution Margin as a % of revenue	16.6	%			13.0	%

GAAP Measures:	GAAP Measures:
GAAP Measures:
GAAP Measures:
Net income (loss)
Net income (loss)
Net income (loss)	Net income (loss)	$	(31,557)		$	5,572
Net loss margin	Net loss margin	(6.2)		%	1.1		%	Net loss margin	(4.0)	%			(7.2)	%

Non-GAAP Measures:	Non-GAAP Measures:
Non-GAAP Measures:
Non-GAAP Measures:
Adjusted EBITDA(c)
Adjusted EBITDA(c)
Adjusted EBITDA(c)	Adjusted EBITDA(c)	$	(1,977)		$	34,895
Adjusted EBITDA Margin(c)	Adjusted EBITDA Margin(c)	(0.4)		%	6.6		%	Adjusted EBITDA Margin(c)	2.7	%			(1.7)	%

________________________

(a)During the second quarter ended December 31, 2023, the Company acquired two PACE programs in California from ConcertoCare, one of which is operational. With the addition of the operational ConcertoCare PACE program, the Company operated 18 PACE centers as of December 31, 2023. During the third quarter ended March 31, 2023, the Company consolidated its Germantown LIFE center with its Allegheny and Henry Avenue LIFE centers in Pennsylvania.

(b)Amounts are ~~approximate.~~approximate due to rounding.

(c)Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures. For a definition and reconciliation of these non-GAAP measures to the most closely comparable GAAP measures for the period indicated, see below under “Adjusted EBITDA and Adjusted EBITDA Margin.”

Centers

We define our centers as those centers open for business and attending to participants at the end of a particular period.

Census

Our census is comprised of our capitated participants for whom we are financially responsible for their total healthcare costs.

Total Member Months

We define Total Member Months as the total number of participants multiplied by the number of months within a year in which each participant was enrolled in our program. We believe this is a useful metric as it more precisely tracks the number of participants we serve throughout the year.

~~Table of Contents~~

Center-level Contribution Margin

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 ~~expense~~expenses or corporate, general and administrative expenses across our centers. Center-level Contribution Margin was ~~$72.8~~$61.5 million and ~~$111.7~~

Table of Contents

$44.0 million for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively. The increase in Center-level Contribution Margin for the six months ended December 31, 2023 was primarily due to a 9.7% increase in total revenue, offset by a 5.6% increase in external provider costs during the same period. For more information relating to Center-level Contribution Margin, see Note 14 “Segment Reporting” to our 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:



	Six Months Ended December 31, 2023							Six Months Ended December 31, 2022
(In thousands)	PACE		All other		Totals			PACE		All other(1)		Totals
Capitation revenue	$	370,734	$	—	$	370,734		$	338,071	$	—	$	338,071
Other service revenue	153		495		648			176		427		603
Total revenues	370,887		495		371,382			338,247		427		338,674
External provider costs	200,322		—		200,322			189,744		—		189,744
Cost of care, excluding depreciation and amortization	109,267		303		109,570			104,595		338		104,933
Center-Level Contribution Margin	61,298		192		61,490			43,908		89		43,997
Overhead costs(a)	65,425		9		65,434			67,107		79		67,186
Depreciation and amortization	8,334		225		8,559			6,881		214		7,095
Interest expense, net	1,506		90		1,596			735		91		826
Other income	(1,517)		—		(1,517)			(480)		—		(480)
Other expense	1,882		—		1,882			—		—		—
Loss Before Income Taxes	$	(14,332)	$	(132)	$	(14,464)		$	(30,335)	$	(295)	$	(30,630)
Loss Before Income Taxes as a % of revenue					(3.9)		%					(9.0)		%
Center- Level Contribution Margin as a % of revenue					16.6		%					13.0		%

(a)Overhead consists of the sales and marketing and corporate, general and administrative financial statement line items.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA as net income (loss) adjusted for interest expense, 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, ~~class action~~ litigation costs and settlements, M&A and de novo center development, business optimization, ~~EMR~~electronic medical record ("EMR") implementation and ~~facility expansion, relocation and closure.~~loss on minority equity interest investment. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total ~~revenue less any exceptional, one time revenue items.~~revenue. For the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, net loss was ~~$31.6~~$14.8 million and ~~net income was $5.6~~$24.2 million, respectively, representing a year-over-year decrease of ~~666.3%~~39.0%. Adjusted EBITDA was ~~($2.0 million)~~$10.0 million and ~~$34.9 million,~~($5.8 million), for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022, respectively, representing a year-over-year ~~decrease~~increase of ~~105.7%~~273.3%. For the ~~nine~~six months ended ~~March~~December 31, 2023, net loss margin was ~~6.2%~~4.0%, as compared to net ~~income~~loss margin of ~~1.1%~~7.2% for the ~~nine~~six months ended ~~March~~December 31, 2022. For the ~~nine~~six months ended ~~March~~December 31, 2023, our Adjusted EBITDA margin was ~~negative 0.4%~~2.7%, as compared to our Adjusted EBITDA margin for the ~~nine~~six months ended ~~March~~December 31, 2022 of ~~6.6%~~negative 1.7%. The ~~decrease~~increase in Adjusted EBITDA and Adjusted EBITDA margin is primarily from (i) increased capitation rates and (ii) lower corporate, general and administrative costs partially offset by, (i) increased center-level headcount and wage rates associated with a competitive labor market, and (ii) increased housing utilization and ~~rates~~unit cost as mandated by the ~~states, and (iii) higher corporate, general, and administrative expenses, primarily attributable to increased headcount to support compliance and to bolster our organizational capabilities.~~states.

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

Table of Contents

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.

~~Table of Contents~~

A reconciliation of net loss to Adjusted EBITDA, ~~to net income,~~ the most directly comparable GAAP measure, for each of the periods is as follows:

Three months ended March 31, Nine months ended March 31,
2023 2022 2023 2022
in thousands
Net income (loss) $ (7,310) $ (3,158) $ (31,557) $ 5,572
Interest expense, net 405 709 1,231 1,930
Depreciation and amortization 3,992 3,850 11,087 10,435
Provision (benefit) for income tax (1,365) (4,116) (7,747) 81
Stock-based compensation 1,208 845 3,721 2,586
Executive severance and recruitment(a)
— — — 4,123
Litigation costs and settlement(b)
3,274 377 7,839 2,820
M&A and de novo center development(c)
146 693 452 1,533
Business optimization(d)
1,394 2,329 8,418 4,720
EMR implementation(e)
2,045 402 4,579 1,095
Adjusted EBITDA $ 3,789 $ 1,931 $ (1,977) $ 34,895


	Three months ended December 31,				Six months ended December 31,
	2023		2022		2023		2022


Net loss	$	(3,821)	$	(10,547)	$	(14,783)	$	(24,247)
Interest expense, net	935		223		1,596		826
Depreciation and amortization	4,290		3,662		8,559		7,095
Provision (benefit) for income tax	93		(2,912)		319		(6,383)
Stock-based compensation	1,766		1,212		3,589		2,512
Litigation costs and settlement(a)	198		1,282		1,905		1,238
M&A and de novo center development(b)	284		336		693		622
Business optimization(c)	774		2,846		2,933		10,035
EMR implementation(d)	1,370		1,944		3,304		2,534
Loss on minority equity interest(e)	$	1,882	$	—	$	1,882	$	—
Adjusted EBITDA	$	7,771	$	(1,954)	$	9,997	$	(5,768)

________________________

(a)Reflects ~~charges related to executive severance and recruiting.~~

~~(b)Reflects a $1.2 million reserve for a wage and hour class action settlement for the three and nine months ended March 31, 2023 and~~ charges/(credits) related to litigation by stockholders, litigation related to de novo center development, 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.

~~(c)~~(b)Reflects charges related to M&A transaction and integrations, and de novo center developments.

~~(d)~~(c)Reflects charges related to business optimization initiatives. Such charges related to one-time investments in projects designed to enhance our technology and compliance systems, improve and support the efficiency and effectiveness of our operations, and third party support to address efforts to remediate deficiencies in audits. For the three months ended ~~March~~December 31, 2023 this includes (i) $0.3 ~~million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $0.2~~ million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities (ii) $0.3 million of costs related to severance and other organizational costs and (iii) ~~$0.6 million in the consolidation of the Germantown, Pennsylvania center, and (iv) $0.3~~$0.2 million related to other non-recurring ~~projects aimed at reducing costs and improving efficiencies.~~charges. For the ~~nine~~three months ended ~~March~~December 31, ~~2023~~2022 this includes (i) ~~$1.5~~$0.5 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) ~~$5.3~~$0.8 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 (iii) $0.1 million for related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the six months ended December 31, 2023 this includes (i) $2.1 million of costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and strengthen our enterprise capabilities (ii) $0.3 million of costs related to severance and other organizational costs and (iii) ~~$0.6~~$0.5 million inrelated to charges for technology improvements, environmental, sustainability, and governance reporting, and other non-recurring charges. For the ~~consolidation~~six months ended December 31, 2022 this includes (i) $1.2 million related to consultants and contractors performing audit and other related services at sanctioned centers, (ii) $5.1 million of ~~the Germantown center~~costs associated with third party consultants as we implement our core provider initiatives, assess our risk-bearing payor capabilities, and ~~(iv) $1.0~~strengthen our enterprise capabilities, and (iii) $0.7 million related to other non-recurring projects aimed at reducing costs and improving efficiencies.

~~(e)~~(d)Reflects non-recurring expenses relating to the implementation of a new EMR vendor.

(e)Reflects impairment charges related to our minority equity interest in Jetdoc, Inc.

Table of Contents

Liquidity and Capital Resources

General

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~~December 31, 2023, we had cash and cash equivalents of ~~$121.7 million.~~$54.1 million, a decrease of $73.1 million from June 30, 2023. The decrease in cash and cash equivalents was primarily due to a payment of $23.9 million for the acquisition of the ConcertoCare PACE centers during the second quarter of fiscal year 2024 and 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 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 in Note 8, ~~“Long Term~~“Long-Term Debt” to the condensed consolidated financial statements) due 2026, (ii) ~~capital~~finance and operating lease obligations, which are generally paid on a monthly basis and include maturities through ~~2025~~2028 and 2032, respectively, (iii) the operations of our business, including

~~Table of Contents~~

special projects such as our transition to a new EMR vendor, with respect to which we ~~expect to incur~~incurred non-recurring implementation costs over the ~~next~~last three months, and expect to incur ongoing costs through ~~2026,~~2024 and beyond, and third party support to address remediation efforts, ~~and~~ (iv) income tax payments, which are generally due on a quarterly and annual ~~basis.~~basis, and (v) capital additions, which included costs relating to the acquisition of the ConcertoCare PACE centers that took place during the second quarter of fiscal year 2024, and the development of de novo centers, including those in Florida and California. We also ~~will~~invest and for the foreseeable future expect to continue investing in the effective implementation of post-sanction corrective remediation plans (CAPs) and other corrective initiatives as a result of deficiencies found during audits at some of our centers, and our ability to continually provide necessary and quality services to our participants. ~~We also have used and expect to increase the use of capital resources for capital additions, which include costs relating to the development of de novo centers, including those in Florida.~~ 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.

~~Our cash obligations consist of repayments of long-term debt and obligations under operating and finance leases.~~ As of ~~March~~December 31, 2023, we had ~~$70.7~~$67.9 million of long-term debt outstanding. As of ~~March~~December 31, 2023, we had future minimum operating lease payments under non-cancellable leases through the year 2032 of ~~$29.1~~$37.5 million. We also had non-cancellable finance lease agreements with third parties through the year ~~2027~~2028 with future minimum payments of ~~$21.6~~$18.3 million. For additional information, see Note 7, “Leases”, Note 8, ~~“Long Term~~“Long-Term Debt”, and Note 9, “Commitments and Contingencies” in our condensed consolidated financial statements.

We believe that our cash and cash equivalents and our cash flows from operations, available funds, and access to financing sources, including our 2021 Credit Agreement and 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, ~~subject to our ability to effectively remediate deficiencies identified in audits of our centers~~ and the expansion of sales and marketing ~~activities.~~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.

~~The~~On March 8, 2021, the Company entered into a credit agreement (as amended, the "2021 Credit ~~Agreement~~Agreement") that consists 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. The borrowing capacity under the Revolving Credit Facility is subject (i) any issued amounts under our letters of credit and (ii) applicable covenant compliance restrictions and any other conditions precedent to borrowing. Principal on the Term Loan Facility is paid each calendar quarter in an amount equal to 1.25% of the initial term loan on closing date.

~~Any outstanding~~Outstanding principal amounts under the 2021 Credit Agreement accrue interest at a variable interest rate. As of ~~March~~December 31, 2023, the interest rate on the Term Loan Facility was ~~6.60%~~7.30%. Under the terms of the 2021 Credit Agreement, the Revolving Credit Facility fee accrues at 0.25% of the average daily unused amount and is paid quarterly. As of ~~March~~December 31, 2023, we had no borrowings outstanding, ~~$3.0~~$3.1 million of letters of credit issued, and ~~$97.0~~$96.9 million of remaining borrowing capacity under the Revolving Credit Facility. As of ~~March~~December 31, 2023, we also had $2.3 million principal amount outstanding under our convertible term loan. Monthly principal and interest payments for the convertible

Table of Contents

term loan are approximately $0.02 million, and the loan bears interest at an annual rate of 6.68%. The remaining principal balance is due upon maturity, which is August 20, 2030.

For more information about our debt, see Note 8 “Long-Term Debt” to our condensed consolidated financial statements.

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business.

~~Table of Contents~~

Condensed Consolidated Statements of Cash Flows

Our consolidated statements of cash flows for the ~~nine~~six months ended ~~March~~December 31, 2023 and 2022 are summarized as follows:


		Nine months ended March 31,
		2023		2022		$ Change
	Six months ended December 31,
		2023
		2023
		2023						2022	$ Change
in thousands	in thousands
Net cash provided (used) by operating activities		$	7,085	$	24,059	$	(16,974)
Net cash used by operating activities
Net cash used by operating activities
Net cash used by operating activities
Net cash used in investing activities	Net cash used in investing activities	(64,329)		(23,578)		(40,751)
Net cash used in financing activities	Net cash used in financing activities	(5,480)		(4,670)		(810)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	$	(62,724)	$	(4,189)	$	(58,535)

Operating Activities. The change in net cash provided (used) by operating activities was primarily due to the net effect of (i) net loss of ~~$31.6~~$14.8 million in the current year period compared to a net ~~income~~loss of ~~$5.6~~$24.2 million in the prior year period, as described further above, ~~and~~ (ii) ~~a net decrease~~an increase in ~~working capital~~accounts receivable primarily attributable to the timing of receipt of payments for ~~operating leases~~certain Medicaid receivables, and ~~reported and estimated claims.~~(iii) impacts of deferred revenue due to the timing of payments received during prior year.

Investing Activities. Investing activities were made up of approximately ~~$19.3~~$23.9 million payment for the acquisition of two PACE programs from ConcertoCare, $4.2 million in purchases of property and equipment and ~~$45.0~~$1.2 million for ~~purchases~~reinvested dividends of short-term investments, consisting primarily of managed income funds invested in investment grade short-term fixed and floating rate debt securities aimed at creating income while maintaining low volatility on principal. Our investment in managed income funds regularly pay dividends which are reinvested into the funds.

Financing activities. The increase in net cash used in financing activities was primarily due to an increase in taxes paid related to net share settlements of stock-based compensation awards of $0.6 million and an increase in principal payments on finance ~~leases.~~leases of $0.7 million.

Emerging Growth Company and Smaller Reporting Company

We qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups (“JOBS”) Act and a “smaller reporting company” as defined by the Exchange Act. For as long as we are an “emerging growth company” or a “smaller reporting company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” or “smaller reporting companies,” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, only being required to present two years of audited financial statements, plus unaudited condensed consolidated financial statements for applicable interim periods and the related discussion in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements, exemptions from the requirements of holding non-binding advisory “say-on-pay” votes on executive compensation and stockholder advisory votes on golden parachute compensation.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to take advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act until we are no longer an emerging growth company. Our election to use the phase-in periods permitted by this election may make it difficult to compare our

Table of Contents

financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the longer phase-in periods permitted under the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply with public company effective dates, such election would be irrevocable pursuant to the JOBS Act.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the

~~Table of Contents~~

reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions, impacting our reported results of operations and financial condition.

Certain accounting estimates involve significant judgments and assumptions by management, which have a material impact on the carrying value of assets and liabilities and the recognition of income and expenses. We consider these accounting estimates to be critical accounting estimates. The estimates and assumptions used by management are based on historical experience and other factors, which are believed to be reasonable under the circumstances.

For a description of our estimates regarding our critical accounting estimates, see “Critical Accounting Estimates” in the ~~2022~~2023 10-K. With the exception of the adoption of ASC 842 – Leases, as more thoroughly described in Note 7 “Leases”, there have been no significant changes in our critical accounting policies, estimates, or methodologies to our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.

Interest rate risk

As of ~~March~~December 31, 2023, we had total outstanding debt of ~~$68.4~~$65.6 million in principal amount under the Term Loan Facility, $2.3 million under the convertible term loan, and no outstanding debt under the Revolving Credit Facility (each as defined in Note 8, “Long-Term Debt” to our condensed consolidated financial statements). As of June 30, ~~2022,~~2023, we had total outstanding debt of ~~$71.3~~$67.5 million in principal amount under the Term Loan Facility and $2.3 million under the ~~Convertible Term Loan.~~convertible term loan. As of ~~March~~December 31, 2023, the interest rate on the Term Loan Facility was 6.60%. We plan to amend our 2021 Credit Agreement loan documents to replace the reference rate with the Secured Overnight Financing Rate ("SOFR") prior to the discontinuance of the London Interbank Offered Rate ("LIBOR")7.30%.

We had cash and cash equivalents of ~~$121.7~~$54.1 million and ~~$184.4~~$127.2 million as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, respectively, which are deposited with high credit quality financial institutions and are primarily in demand deposit accounts.

Our cash and cash equivalents and interest payments in respect of our debt are subject to market risk due to changes in interest rates. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on our business, financial condition or results of operations.

We had short-term investments of ~~$45.8~~$44.7 million and $—$46.2 million as of ~~March~~December 31, 2023 and June 30, ~~2022,~~2023, respectively, which are primarily invested in managed income funds managed by major financial institutions. The funds mainly invest in investment grade, U.S. denominated short-term fixed and floating rate debt securities. Securities are subject to market risk and sensitive to changes in interest rates. While the instruments held by the funds are generally less sensitive to interest rate changes than instruments with longer maturities due to their short-term nature, the funds may face a heightened level of interest rate risk due to changes in monetary policy. During periods when interest rates are low or negative, the funds yields, and total returns may also be low, or the funds may be unable to maintain positive returns. We do not believe that an increase or decrease in interest rates of 100 basis points would have a material effect on these short-term investments.

Table of Contents

Inflation risk

Based on our analysis of the periods presented, we believe that inflation has not had a material effect on our operating results. There can be no assurance that future inflation will not have an adverse impact on our operating results and financial condition.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules

~~Table of Contents~~

13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that ~~these~~our disclosure controls and procedures were effective as of ~~March~~December 31, 2023.

Changes ~~to our~~in Internal Controls over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended ~~March~~December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4344

Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding our material pending legal proceedings, refer to Note 9 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Item 1.A Risk Factors

~~There~~Except as set forth below, there have been no material changes to the risk factors previously disclosed in our ~~2022~~2023 10-K.

Labor relations matters could have a material adverse effect on our business, reputation, prospects, results of operations and financial condition.

On October 27, 2023, following a demand from a labor union for the Company to recognize it as the collective bargaining representative of the nurses and certified nurse assistants in our Pennsylvania centers, we filed a petition with the National Labor Relations Board to conduct two elections. The National Labor Relations Board conducted the elections on December 6, 2024, at which the nurses and certified nurse assistants in our Pennsylvania centers voted to unionize. These employees represent approximately 1% of our total workforce. Even though we are currently unaware of other unionization efforts, it is possible that additional employees in our Pennsylvania centers or in other geographies may follow. As we negotiate collective bargaining agreements for the two new bargaining units at the Pennsylvania centers, and any other units that may organize in the future, employees may threaten and/or engage in work stoppages and strikes, and our labor costs may continue to increase as a result. The unavailability of staff, or the inability of the Company to control labor costs related to these matters and future efforts to unionize, could have a material adverse effect on our business, reputation, prospects, results of operations and financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

4445

Table of Contents

Item 6. Exhibits

The following is a list of all exhibits filed or furnished as part of this report:

EXHIBIT INDEX


Exhibit No.						Description

3.1						Second Amended and Restated Certificate of Incorporation of InnovAge Holding Corp., filed March 3, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2021).

3.2						Amended and Restated Bylaws of InnovAge Holding Corp., effective March 3, 2021 (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2021).

10.1						~~Employment~~Class B Unit Award Agreement, dated ~~February 28,~~December 18, 2023, by and between ~~InnovAge Holding Corp.~~TCO Group Holdings, L.P. and ~~Christine Bent~~Nicole D'Amato (incorporated by reference to Exhibit 10.1 to the ~~Company's~~Company’s Current Report on Form 8-K filed with the SEC on ~~March 1,~~December 19, 2023).

31.1						Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1†						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2†						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

104						Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

________________________

†The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed “furnished” with this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

4546

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.


	INNOVAGE HOLDING CORP.

Date: ~~May 9, 2023~~February 6, 2024	By:	/s/ ~~Barbara Gutierrez~~Benjamin C. Adams
	Name:	~~Barbara Gutierrez~~Benjamin C. Adams
	Title:	Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)

4647


in thousands	Operating Lease		Capital Lease
Amount remaining in 2023	$	4,873	$	4,405
2024	4,581		3,909
2025	4,122		3,126
2026	4,061		2,092
2027	3,764		1,393
Thereafter	10,265		535
Total minimal rental payments	31,666		15,460
Less: Amount representing interest			(2,652)
Subtotal			12,808
Current portion			3,368
Long-term portion			$	9,440