INNV 10-K & 10-Q changes, risk factors and insider trading

Our business, results of operations, and financial condition are subject to numerous risks and uncertainties. You should carefully consider the following risk factors before making a decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that affect us. If any of the following risks occur, our business, financial condition, operating results and prospects could be materially and adversely affected. You should read these risk factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Part II, Item 8 of this Annual Report.

•Our growth strategy may not prove viable. Our ability to grow depends upon a number of factors, including recruiting and retaining participants, finding suitable geographies for new centers, the adoption of government actions which may preclude us from acquiring or opening new centers in certain jurisdictions, the outcome of our organizational and enterprise efficiency initiatives, entering into government payor arrangements in new jurisdictions, results of audits, investigationsaudits and ongoing or new remediation efforts,investigations, ensuring compliance with regulatory and contractual requirements, identifying appropriate locations for new and existing centers, and hiring members of our IDTs and other employees.

•Our overall business results have beenbeen, and we expect will continuecontinue, to be impacted by ongoing macroeconomicmacroeconomic, geopolitical and industry-related challenges. Macroeconomic and industry challenges, including labor shortages, labor competition, high inflation, and supply chain disruptions as a result of tariffs and trade disputes, have impacted and we expect will continue to impact our business operations. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals due to higher demand for healthcare services, the pipeline of qualified professionals, and with respect to direct care roles, changes in federal immigration policy and enforcement.

•We are subject to legal proceedings, enforcement actions and litigation, malpractice and privacy disputes, which are costly and could materially harm our business. WeFrom time to time, we are party to lawsuits and legal proceedings from various parties. These matters are often expensive and disruptive to our business operations. Among others, we are currently subject to civil investigative demands and stockholder lawsuits. These matters could result in significant cash settlements, and the time necessary to litigate could harm our business, financial condition, and results of operations.

•Our records and submissionsother information and materials submitted to government payors may contain inaccurate or unsupportable information regardingapplicable to participants’ risk adjustment scores of participants,scores, which could subject us to repayment obligations or penalties. CMS may audit PACE organizations’ risk adjustmentadjustment-related data submissions.data. Erroneous data submissions could result in inaccurate revenue and risk adjustmentrisk-adjusted payments. Correction or retroactiverisk adjustmentsadjustment reconciliations in later periods could require us to refund a portion of the revenue that we received, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our ability to grow depends upon a number of factors, including recruiting and retaining participants at new and existing centers, finding suitable geographies that have aging populations and viable rate structures, the adoption of government actions which may preclude us from acquiring or opening new centers in certain jurisdictions, the outcome of our organizational and enterprise efficiency initiatives, entering into government payor arrangements in new jurisdictions, results of audits, investigations and ongoing or new remediation efforts, ensuring compliance with regulatory and contractual requirements, identifying appropriate locations for new and existing centers, completing build-outs of new centers within proposed timelines and budgets and hiring members of our IDTs and other employees.

•implementation of our organizationalcontinuing clinical and enterpriseoperational efficiencyvalue initiatives may be more expensive than anticipated and we may fail to realize the anticipated benefits thereof within the expected timeline, or at all;

•we may be subject to sanctions as a result of audits and other regulatory processes and proceedings that could include temporary or permanent suspension of enrollments, debarment or exclusion from participation in federal healthcare programs, and the revocation of a center’s license and suspension or revocation of required attestations to open de novo centers, which may in turn result in participant attrition and preclude us from opening de novo centers and conducting tuck-in acquisitions. As previously disclosed, the California Department of Health Care Services (“DHCS”), suspended the state-required attestations for a planned de novo center in Downey and for the de novo center we acquired in Bakersfield, California in 2023. ThereWhile we have withdrawn our PACE application for the Downey center, there is no guarantee that suchthe attestationsattestation for Bakersfield will be reinstated or that similar situations will not occur in the future.

An element of our growth strategy is to identify, pursue and successfully complete and integrate tuck-in acquisitions, joint ventures and other strategic partnerships to expand our operations and support our growth. ForMost example, in December 2023, we 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”); in May 2024,recently, we entered into a joint venture with Orlando Health with respect to the InnovAge Florida PACE - Orlando (“InnovAge Orlando”) center in Florida; and in August 2025, we entered into a joint venture with Tampa General Hospital with respect to the InnovAge Florida PACE - Tampa center in Florida. We intend to continue pursuing relationships with key stakeholders, existing organizations and other care providers in order to form partnerships in target geographies.

However, acquisitions, joint ventures and other strategic partnerships, involve numerous risks, including potential failure to consummate negotiated transactions, difficulties in successfully integrating the operations and personnel, navigating the necessary regulatory approval requirements, including securingcompliance with federal Anti-Kickback Statute regulatory safe harbors necessaryapplicable forto healthcaresuch relatedtransactions, jointime venturesconstraints underand thecompeting Anti-Kickback Statute, distractioninterests of management while overseeing thesuch transactions, and disruption of,to our existing operations, difficultiesoperational and compliance challenges in entering new markets in which we have no or limited direct prior experience, difficulties in managing novel challenges in markets we have no or limited direct prior experience, and difficulties in achieving thedesired synergies we anticipated.synergies.

In addition, we incur costs associated with potential acquisitions that we pursue orand failare tonot close,consummated, includingsuch as alitigation resultor other dispute resolutions expenses associated with termination of litigationtransaction related to a failed transaction.agreements. We also may need to expenddeploy resources to ensure target and acquired PACE centers are operating in compliance with regulatory and contractual requirements, as well as any corrective action plans. Any failure to select suitable opportunities at fair prices, conduct appropriate due diligence, acquire, and successfully integrate the acquired center,center includinginto our operations, particularly when acquired centers operateoperating in new geographic markets, could materially and adversely impact our growth strategies, financial condition andor results of operations.

Further, laws governing the review and approval of healthcare transactions could limit our ability to successfully complete acquisitions. Several states, including California, New Mexico, and Colorado have adopted laws focused on competition, quality, access, and cost that either authorize state agencies to review and approve certain healthcare transactions, or require notice prior to certain healthcare transactions, such as in California (requiring notice to the officeOffice of Health Care Affordability with certain transactions referred to their attorney general for further review) or in New Mexico (requiring approval for certain transactions involving acquisitions and other changes in control of hospitals,control, including formation of a partnership or joint venture that results in an indirect change in control). Many other states, including Pennsylvania where several bills have been proposed, are currently voting on or considering similar legislation. TheseMoreover, noticesstate andattorneys approvals typically require a substantial amount of information,general, including supportingin documentation.California, Whilehold approval authority with respect to certain of these proposed bills and restrictions are targeted at physician and dental practice management, they reflect a broader trend of increased regulatory scrutiny ofother healthcare transactions, which could negatively affect our ability to grow our business. These transactions may also cause us to significantly increase our interest expense, leverage and debt service requirements if we incur additional debt to pay for an acquisition or investment, issue common stock that would dilute our current shareholders’ percentage ownership or incur asset write-offs and restructuring costs and other related expenses that could have a material adverse impact on our operating results. Acquisitions, joint ventures and strategic investments also involve numerous other risks, including potential exposure to assumed liabilities, as well as undetected internal control, regulatory or other issues, or unanticipated additional costs.transactions.

Additionally, participant enrollment for PACE is ongoing each month and requires states to verify eligibility, a process which can result in delays in enrollment. We have experienced, and continue to experience, an increase in gaps of eligibility for both new enrollments and Medicaid redetermination applications due to processing delays and other enrollment and redetermination procedures that vary by State and county. While participants continue to receive care and remain enrolled with us during the redetermination process, the effect of such delays temporarily halts Medicaid revenue related to any closed application and simultaneously increases our risk of revenue recovery. The OBBBA,Reconciliation Act, signed into law on July 4, 2025, generally requires redetermination to occur at least every 6 months instead of annually. As a result, enrollment delays may increase,increase due to insufficient staffing to handle the higher volume of work, and, if the additional redetermination requirement applies to our participants, the risk of revenue recovery may increase for those of our participants subject to such additional redetermination. In the State of California, processing delays resulted in lower estimated per member, per month (“PMPM”) amounts during fiscal year 2025, which triggered a negative adjustment for prior PMPM estimates and also reduced the reimbursements we received from the State. Even though our results of operations have not suffered a material adverse effect from these delays, there is no guarantee that further delays may not adversely impact our results.work.

Our overall business results have been, and we expect will continue to be, impacted by ongoing macroeconomicmacroeconomic, geopolitical and industry-related challenges, including labor shortages, labor competition, inflation, and supply chain disruption as a result of tariffs and trade disputes.

Macroeconomic and industry challenges, including uncertaintylabor surroundingshortages, tradelabor tensionscompetition, high inflation, and supply chain disruptions,disruptions laboras shortages,a laborresult competitionof tariffs and hightrade inflation,disputes have impacted and we expect will continue to impact our business operations and our overall business results. The healthcare sector continues to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals due to higher demand for healthcare services and systemic challenges related to workforce training and the pipeline of qualified professionals.professionals, and with respect to direct care roles, changes in federal immigration policy and enforcement. We compete with other healthcare providers, primarily hospitalshospitals, other PACE organizations, skilled nursing facilities, Medicare Advantage plans, and other centers,risk-bearing primary care, and other home health care providers in attracting physicians, nurses and medical staff to support our centers, andattracting, recruiting and retaining physicians, nurses, medical staff and other qualified management and support personnel responsibleto forsupport theour centers and their daily operations of each of our centers.operations.

Furthermore, high inflation has increased the cost of living, and consequently, wage pressure for healthcare professionals, which has contributed to an increasingly competitive labor market. Increased wage pressure for healthcare professionals ishas also been impacted by certain laws and regulations, such as the adoption of California Senate Bill No. 525 (“SB 525”), which raised minimum wage for many California healthcare workers and impacted many of our contractors and other third-party providers. As a result of competition generated by SB 525 and other California market conditions, we have received rate increases from third party vendors, including those providing home health services and care partner services, increasing our cost of care in California.California in fiscal year 2026. We also increased our wages in fiscal year 2026 for impacted healthcare workers and other comparable market positions in the California market. Because thesubstantially vast majorityall of our revenue consists of prospective monthly capitated, or fixed, payments per participant, our ability to pass along increased costs is limited. In particular, if labor costs rise at an annual rate greater than our netthe annual consumerincreases pricein indexour basketMedicare updateand fromMedicaid Medicare,capitation rates, our results of operations and cash flows will likely be adversely affected.

If labor market conditions disrupt our ability to attract, recruit and retain healthcare professionals, we may not be able to execute our growth plan and grow capacity in our existing centers or open de novo centers or we may have to do so at costs higher than originally budgeted, which, in turn, could increase our capital needs during a time of highelevated interest rates and when conditions in the credit and capital markets are volatile. Cost of care and related cost per participant increased for fiscal year 20252026 compared to 2024,2025, partially as a result of higher wage rates. In addition, labor relations matters could have a material adverse effect on our business. Certain nurses in our Pennsylvania centers (less than 1% of our total workforce) are represented by unions. If additional employees seek to unionize in the future, employees may threaten and/or engage in work stoppages and strikes and our labor costs may materially increase.

We rely on both domestic and international suppliers for medical equipment and supplies, including pharmaceuticals used in our business. Recent U.S. tariff announcements,tariffs, retaliatory measures by other countries, and significant uncertainty surrounding trade tensions and military conflicts, in particular the conflict in the Middle East, may result in higher prices for medical and other supplies and lead to supply chain disruptions and additional costs. Factors arising from supply chain challenges such as raw material shortages, longer lead times, and increased transportation expenses may affect our ability to grow our business effectively and may pose risks to our ability to acquire essential medical supplies in a timely and efficient manner. The degree to which tariffs and the conflict in the Middle East may affect the global supply chain and our business will depend on theirthe timing, duration and magnitude,magnitude of these events, which may be changedchange at any time and with little or no prior notice.

Additionally, the healthcare industry is subject to shifting political priorities and initiatives. As our stakeholders have evolving, varied, and sometimes conflicting expectations regarding political positions, we may experience adverse reactions from some of our stakeholders for positions we take on, and advocacy for, Medicare and Medicaid funding and program design in the future.

DuringGovernmental periods of high unemployment, governmental entities often experience budget deficits as a result of increased costs and lower than expected tax collections. These budget deficitspayors at the federal, state and local governmentlevels entitiescontinue to face structural budget deficits and fiscal pressures driven by rising operational outlays, healthcare program expansions, and shifting revenue collections. These ongoing budget constraints have decreased, and may continue to decrease, spending or reimbursement rates for health and human service programs, including Medicare, Medicaid, PACE and similar programs,programs. whichBecause these programs represent nearly all of the payor sources for our centerscenters, andany whichprolonged funding reductions may have a material effect on our results of operations and financial condition. To date, we believe thatWhile macroeconomic and industry conditions, including labor shortages and inflation, have increased our cost of care to date, we believe that these conditions have not had a material effect on our overall operating results.results However,to date; however, there can be no assurance that continued challenges will not have an adverse impact on our operating results and financial condition.condition in the future.

Our centers will continue to be subject to federal and state audits, and there is no guarantee that future audits will not find deficiencies similar to, or different from, the ones found in connection with prior audits. As previously disclosed, we currently continue to fulfill our obligations under a formal corrective action plan issued by DHCS with respect to findings resulting from the medical review of our San Bernardino, California center.

In general, inspections, reviews, audits, requests for information or investigations with adverse findings, and in particular the audits described above,findings have resulted in and may further result in:

•the revocation of a center’s license or suspension of state attestations to open de novo centers, such as the case with our Downey and Bakersfield, California centerscenter; and

We are party to lawsuits and legal proceedings from participants, employees, or other third parties for various actions. These matters are often expensive and disruptive to our business operations. We face and may in the future face allegations, lawsuits, including class actions, and regulatory inquiries, requests for information, audits and investigations regarding care and services provided to participants, the FCA, data privacy, security, labor and employment, securities laws, consumer protection or intellectual property. We also have faced and may in the future face allegations or litigation related to our potential and completed acquisitions,acquisitions and strategic transactions, securities issuances orand business practices, including contract claims and public disclosures about our business. We are currently party to a stockholder lawsuit asserting derivative claims for breach of fiduciary duty 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 our centers and alleged misstatements in our public filings relating to those matters. Additionally, we are currently a party to an arbitration proceeding initiated by our former pharmacy services vendor asserting claims for breach of contract and breach of confidentiality, non-renewal and termination of its services agreements. We are currently unable to predict the outcome of these matters. See Part I, Item 3 “Legal Proceedings” for more information.

The following discussion and analysis summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and cash flows of our company as of and for the periods presented below. The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. 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. Our historical results are not necessarily indicative of the results that may occur in the future and actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and in the sections entitled “Risk Factors” and “Cautionary Note About Forward-Looking Statements” included in this Annual Report.

InnovAge’s programs are designed to allow frail seniors to live life on their terms by aging in place, in their own homes and communities, for as long as safely possible. Through our Program of All-Inclusive Care for the Elderly (“PACE”), we fulfill a broad range of medical and ancillary services for seniors, including in-home care services (skilled, unskilled and personal care), centerin-center services such as primary care, physical therapy, occupational therapy, speech therapy, dental services, mental health and psychiatric services, meals, and activities; transportation to and from the PACE center and third-party medical appointments; and care management. The Company manages its business as one reportable segment, PACE.

We are the leading healthcare delivery platform by number of participants focused on providing all-inclusive, capitated care to high-cost, dual-eligible seniors. Our programs are designed to directly address two of the most pressing challenges facing the U.S. healthcare industry: rising costs and poor outcomes. The purpose of our participant-centered care delivery approach is to improve the quality of care our participants receive, while keeping them in their homes for as long as safely possible and reducing over-utilization of high-cost care settings such as hospitals and nursing homes. Our participant-centered approach is led by our Interdisciplinary Care Teams (“IDTs”), who oversee all aspects of each participant’s unique care plan and function as the core group of care providers to our participants. We directly manage and are responsible for all healthcare needs and associated costs for our participants, including housing costs, where applicable. We directly contract with government payors, such as Medicare and Medicaid, and do not rely on third-party administrative organizations or health plans. We believe our model aligns with how healthcare is evolving, namely (i) the shift toward value-based care, in which coordinated, outcomes-driven, quality care is delivered while reducingseeking to reduce unnecessary spend, (ii) eliminatingreducing excessive administrative costs by contracting directly with the government, (iii) focusing on the patient experience and (iv) addressing social determinants of health.

Increased cost of care and external provider costs. In fiscal year 2025, we experienced increased cost of care per participant compared to fiscal year 2024, partly as a result of increased salaries, wages and benefits. In fiscal year 2026, weWe anticipate increased cost of care from our third-party service providers in an effort to offset their heightened expenses resulting, in part, from budget pressures due to the OBBBAReconciliation as well asAct, budget cuts to providers from state Medicaid programs, as well as possible increases in cost of medical and other supplies usedcosts in order to provide healthcare services. While we did not experience a material increase to our cost of care through fiscal year 2026, we continue to monitor the situation. We believe that our clinical value initiatives and operational value initiatives, which continue to be developed,executed, may assist us in reducing unnecessary utilization and offsetting the increased cost of care anticipated for fiscal year 2026.2027.

Labor marketmarket. andThroughout accessfiscal toyear supportive2026, housing facilities. Thethe healthcare sector continuescontinued to experience workforce shortages, particularly in geriatrics, primary care and direct care roles, as well as a complex set of challenges in hiring additional professionals. Competition from health systems and home health providers for nurses,providers, drivers and caregiverscaregivers, has intensified, furtherremained challenging for the Company’s ability to recruit and retain staff. In addition, there are systemic challenges related to workforce training and the pipeline of qualified professionals, which have not kept pace with this growing demand. These laborLabor market pressures haveand increasedcompetition continues to impact wage and benefit costs,costs for our direct care providers and have also affected our staffing abilityability, which could impact our enrollment capacity and services.capacity. To mitigate these challenges, we implementedcontinue targetedto review our compensation and benefits to align with the markets in which we operate and focus our retention initiatives,programs alongon withcritical roles and our operational measures to help improve productivity and reducecontinue reducing reliance on agency staffing. Partially as a result of increased competition and other market trends, in conjunction with increased staffing related to our growth, there was an increase in the cost of care for thefiscal year 2026 compared to fiscal year 2025 compared to 2024,2025, as discussed in "Results of Operations" below.

Census and capitation revenue. We experiencedcontinue to monitor the delays and increased gaps in eligibilityeligibility, both for new enrollments and Medicaid redetermination applications during fiscal yearsyear 20252026. and 2024 due to processingSuch delays and othereligibility gaps stem from issues with state enrollment and redetermination proceduresprocesses, thatwhich vary by Statestate and county,county. especiallyWhile inprocessing thedelays Stateabated ofmodestly California.during Infiscal addition,year 2026, it is possible that these delays could persist or be exacerbatedincrease due to potential impacts of the OBBBA,Reconciliation whichAct. The foregoing has not yet had a material effect on the Company’s financial statements or operations; however, we continue to monitor the effects of the OBBBA on the Company.situation.

•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 competition, costs and sanctionsregulatory issued by regulators or suspensions of State attestations required to open new de novo centers.compliance.

•Effectively managing the cost of care for our participants.managing. We receive capitated payments to manage the totality of a participant’s medical care across all settings. The risk pool of our population is highly acute. Various factors, including increased salaries, wages and benefits, increased staffing, annual increases in assisted living and nursing facility unit cost and general medical inflation, have affected our external provider costs and cost of care, excluding depreciation and amortization, which represented approximately 82%77% of our revenue in the year ended June 30, 2025.2026.

•Our ability to expand via de novo centers within existing and new markets. Several factors can affect our ability to open de novo centers, including competition, costs and actions by local and state regulators, such as the moratorium issued in California by the California Department of Health Care Services (“DHCS”) and any sanctions issued by regulators, legal, community or other obstacles in the construction or opening of such centers, and our ability to hire and train enough workers to ramp up these centers to maturity.centers.

•Execute tuck-in acquisitions, strategic transactions and partnerships. Since fiscal year 2019, we have acquired and integrated four PACE organizations for a total of eight operational centers (excluding the PACE center in Bakersfield, California, which is not yet operational). These acquisitions represent expansion of our InnovAge Platform into one new state and five new markets. ByAcquisitions bringingcould acquiredhelp organizations under the InnovAge Platform, we hope to further realizesupport revenue growth and improve operational efficiency and care delivery post-integration. We also have pursued and intend to continue pursuing additional relationships with key stakeholders, existing organizations and other care providers in order to form partnerships in target geographies, such as the joint venture with Orlando Health relating to our Orlando PACE center and the joint venture with Tampa General Hospital relating to our Tampa centercenter. whichIn wasfiscal entered into on August 15, 2025. On January 2,year 2025, with the goal of supporting our growth and improving pharmacy cost-management, we completed the acquisition ofacquired certain pharmacy assets from Tabula Rasa HealthCare Group, Inc. (“TRHC”), awith leadingthe goal of supporting our growth and improving pharmacy care management company, for a total purchase price of $4.8 million. Pursuant to a Management Services Agreement, TRHC provides management services to our acquired pharmacy business with an initial term of five years.cost-management.

•Investing to support growth. We intend to continue investing in our centers, value-based care model, and sales and marketing initiatives to support long-term growth. We expect our expenses to increase in absolute dollars for the foreseeable future to support our growth due,and partially,as tothe additionalresult costs we incur in connection with audits to our centers, remediation plans andof current and potential legal and regulatory proceedings. We plan to continue investing in our growth while also maintaining focus on managing our expenses and results of operations. During fiscal years 20242025 and 20252026 we made investments to increase our sophistication as a payor to drive clinical value, improve outcomes, and manage cost trends.trends, Weand plan to continue investing in such activities in fiscal year 2026.2027. Accordingly, in the short term we expectterm, these activities to increase our expenses as a percentage of revenue, but in the longer term, we anticipate that these investments will positively impact our business and results of operations.

•Seasonality toof our business. Our operational and financial results, including medical costs and per-participant revenue true-ups,risk adjustment reconciliation payments, 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, COVID-19 and COVID-19respiratory syncytial viruses, being more prevalent during colder months of the year, which generally increases per-participant costs and (ii) the number of business days in a period, with shorter periods generally having lower medical costs all else equal. Per-participant risk adjustment reconciliation revenue true-ups represent the difference between our estimate of per-participant capitation revenue to be received and actual revenue received from CMS, which is based on CMS’s determination of a participant’s RAF score as measured twice per year and is based on the evolving acuity of a participant. Where there is a difference between our estimate and the final determination from CMS, we may record either an increase or decrease in truerisk upscore reconciliation revenue. Historically, these true-uprisk adjustment reconciliation payments typically occur between MayJune and August,July, but the timing of these payments is determined by CMS, and we have neither visibility into nor control over the timing of such payments. The variability of participant enrollments and voluntary disenrollments has also been impacted by additional offerings by MAMA, special needs programs and other competitors including PACE organizations in select markets.

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. The concentration of capitation revenue from our various payors for the fiscal years ended June 30, 2026 and 2025 was:

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 amendedrenewed annually each June 30 in all states other than California and Pennsylvania, which contract on a calendar-year basis. We are currently operating in good standing under 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 this Annual Report.

Other Service Revenue. Other service revenue primarily consists of revenues derived from state food grants and rent revenues.grants. 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 this Annual Report.

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, pharmacy, 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. AsWhen 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.

Corporate, General and Administrative Expenses. Corporate, general and administrative expenses include other 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,andaccounting, complianceinsurance, investor relations and other costs asthat we grow our business and continueincur to operate as a public company.company, as well as other costs associated with compliance and growth of our business. However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term, although such expenses may fluctuate as a percentage of revenue from period to period due to the timing and amount of these expenses.

Capitation revenue. Capitation revenue was $988.4 million for the year ended June 30, 2026, an increase of $136.0 million, or 16.0%, compared to $852.4 million for the year ended June 30, 2025, an increase of $89.8 million, or 11.8%, compared to $762.6 million for the year ended June 30, 2024.2025. This increase was driven by a $78.2$66.2 million, or 10.3%7.8% increase in member months (as defined below under “Key Business Metrics and non-GAAP Measures – Total member months”) coupled with ana $11.6$69.9 million, or 1.4%,7.6%, increase in capitation rates. The increase in member months was primarily due to growth in our CaliforniaCalifornia, Colorado, and Colorado centers, and to a lesser extent to the addition of de novo centers in Florida and the acquisition of the Crenshaw center in California.centers. The increase in capitation rates includes aan 7.2%8.4% increase in Medicaid rates partiallycoupled offsetwith bya decrease in revenue reserve and a 2.1%4.1% increase in Medicare rates partially offset by an out of cycle risk score true up payment received in the prior year.rates.

External provider costs. External provider costs were $449.8 million for the year ended June 30, 2026, an increase of $18.7 million, or 4.3%, compared to $431.2 million for the year ended June 30, 2025, an increase of $28.1 million, or 7.0%, compared to $403.0 million for the year ended June 30, 2024.2025. The increase was primarily driven by an increase of $41.3$33.5 million, or 10.3%,7.8%, in member months partially offset by a decrease of $13.4$14.8 million, or 3.0%,3.2%, in cost per participant. The decrease in external provider cost per participant was primarily driven by a decrease in inpatient, assisted living, permanent nursing facility and short stay nursing facility utilization, a decrease in external hospice care associated with the transition of this function to internal clinical resources, and a decrease in pharmacy expense dueassociated towith the transition to in-house pharmacy services. The decrease in external provider cost per participant was partially offset by an increase in inpatient unit cost and an annual increase in assisted living and permanent nursing facility unit cost.cost, and an increase in assisted living utilization.

Cost of care, excluding depreciation and amortization. Cost of care, excluding depreciation and amortization expense was $312.1 million for the year ended June 30, 2026, an increase of $43.2 million, or 16.1%, compared to $268.9 million for the year ended June 30, 2025, an increase of $40.1 million, or 17.5%, compared to $228.8 million for the year ended June 30, 2024, primarily due to an increase of $23.4$20.9 million, or 10.3%,7.8%, in member months coupled with an increase of $16.7$22.3 million, or 6.6%,7.7%, in cost per participant. The overall increase of cost of care (excluding depreciation and amortization) expense was driven by (i) aan $23.8$11.7 million increase in salaries, wages and benefits associated with increased headcount to support growth and higher wage rates, (ii) a $1.5 million increase in software license fees, (iii) a $1.9 million increase in de novo occupancy and administrative expense associated with opening centers in Florida and the acquisition of the Crenshaw center, (iv) a $2.6 million increase in contract provider expense in California associated with growth, (v) $6.7$14.2 million in consultingthird party fees and shipping costs associated with in-house pharmacy services, (iii) $4.3 million increase in contract services, (iv) $4.8 million in supplies and administrative costs, and (viv) aan $1.5$8.6 million increase in fleet expense including contract transportation.

Sales and marketing. Sales and marketing expenses were $34.4 million for the year ended June 30, 2026, an increase of $6.1 million, or 21.8%, compared to $28.2 million for the year ended June 30, 2025, an increase of $3.3 million, or 13.1%, compared to $25.0 million for the year ended June 30, 2024, primarily due to increased headcount and wage rates, and increased marketing spend to support growth and higher wage rates.growth.

Impairments and loss on assets held for sale. Impairments and loss on assets held for sale were $3.2 million for the year ended June 30, 2026 due to (i) impairment charges related to ROU asset and construction in progress related to halting developments to a previously planned de novo center in Downey, California that the Company is no longer pursuing, and (ii) loss on assets held for sale. Impairments and loss on assets held for sale were $13.6 million for the year ended June 30, 2025. This increase was2025 due to (i) impairment charges related to ROU asset and construction in progress related to halting developments to a previously planned de novo center in Louisville, Kentucky that the Company is no longer pursuing, (ii) loss on sale of center equipment that was originally purchased for the center in Louisville, Kentucky, (iii) loss on assets held for sale, and (iv) loss on settlement of lease liability in Louisville, Kentucky. There were no impairments recorded during the year ended June 30, 2024.

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 $4.3 million for the year ended June 30, 2026, a decrease of $0.4 million, or 7.7%, compared to $4.6 million for the year ended June 30, 2025,2025. anThe increasedecrease was primarily due to interest expense of $0.6 million, or 14.6%, compared to $4.0$6.2 million forpartially offset by interest income of $1.9 million from money market funds during the year ended June 30, 2024.2026, The increase was primarily duecompared to interest expense of $6.0 million partially offset by interest income of $1.4 million from money market funds during the year ended June 30, 2025. Interest income during the year ended June 30, 2024 was $3.5 million from money market funds offsetting interest expense of $7.5 million.

(Loss) gain on cost and equity method investments. Loss on cost and equity method investments was $1.4 million for the year ended June 30, 2025, a change of $4.2 million, compared to a gain of $2.8 million for the year ended June 30, 2024. The Company recognized a gain of $4.8 million from the dissolution of the Pinewood Lodge, LLLP (“PWD”) partnership, partially offset by impairment losses of $2.0 million in conjunction with a minority interest investment in Jetdoc, Inc. during the year ended June 30, 2024.2025. The Company recognized a loss of $2.6 million associated with the impairment of a minority interest investment in DispatchHealth Holdings, Inc, partially offset by a $1.3 million net benefit associated with the dissolution of the Pinewood Lodge, LLLP (“PWD”) partnership during the year ended June 30, 2025.

Other income, net. Other income, net consists primarily of the net proceeds received from the sale of or disposal of property and equipment, unrealized gains and losses and investment income related to short-term investments. Other income, net was $1.9 million for the year ended June 30, 2026, an increase of $0.2 million, compared to $1.7 million for the year ended June 30, 2025,2025. aInvestment decreaseincome of $0.8 million, compared to $2.5 million forduring the year ended June 30, 2024.2026 was $1.3 million combined with $0.4 million gain on disposal of capital assets. Investment income during the year ended June 30, 2025 was $2.1 million offset by $0.5 million loss on disposal of capital assets. Investment income during the year ended June 30, 2024 was $2.4 million offset by $0.1 million loss on disposal of capital assets.

Provision (Benefit) 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 InnovAge Senior Housing Thornton, LLC (“SH1”), InnovAge California PACE - Sacramento (“SCR”), InnovAge Florida PACE, LLC (“TMP”), and InnovAge Florida PACE II, LLC (“ORL”) have elected to be taxed as partnerships, and no provision (benefit) for income taxes for SH1,SCR, SCR,TMP, or ORL is included in these consolidated financial statements included in this Annual Report. In addition, no provision (benefit) for income taxes for SH1 is included in the consolidated financial statements through the date of the Company’s sale of its partnership interest in SH1 on September 11, 2025.

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 (benefit) for income taxes.

During the years ended June 30, 20252026 and 2024,2025, we reported provision (benefit) for income taxes of $1.3$0.9 million and $1.4$1.3 million, respectively. The decrease of $0.1$0.4 million is primarily due to (i) pretax book lossincome recognized during the year ended June 30, 2025,2026, as compared to the pretax book loss recognized during the year ended June 30, 20242025 and (ii) the change in our valuation allowance.

During the years ended June 30, 20252026 and 2024,2025, we reported a net loss of $35.3$0.7 million and $23.2$35.3 million, respectively, consisting of (i) operating income (loss) of $29.8$2.6 million and $23.2$(29.8) million, respectively, (ii) other incomeexpense of $4.3$2.4 million and other expense of $1.4$4.3 million, respectively, and (iii) provision for income taxes of $1.3$0.9 million and benefit for income taxes of $1.4$1.3 million, respectively, each as described above.

(a)Includes InnovAge Sacramento andSacramento, InnovAge Orlando, and as of August 15, 2025, InnovAge Tampa, which the Company owns and controls through joint ventures and are consolidated in our financial statements.

We define Total Member Months as the total number of participants multiplied by the number of months within athe yearrespective reporting period 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.

(1)Center-level Contribution Margin from a segment below the quantitative thresholds was attributable to the Senior Housing operating segment of the Company as of June 30, 2025.2026. This segment has never met any of the quantitative thresholds for determining reportable segments.

We define Adjusted EBITDA as net loss adjusted for interest expense, net, other investment income, depreciation and amortization, and provision (benefit) for income tax as well as addbacks for non-recurring expenses or exceptional items, including charges relating to management equity compensation, litigation costs and settlement, M&A diligence, transaction and integration, business optimization, EMR implementation, loss (gain) on cost and equity method investments, asset impairments and loss on assets held for sale, and loss on sale of assets. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue.

For the years ended June 30, 20252026 and 2024,2025, our net loss was $35.3$0.7 million and $23.2 million, respectively, representing a year-over-year decline of 52%, and Adjusted EBITDA was $34.5 million and $16.5$35.3 million, respectively, representing a year-over-year increase of 109%.98%, and Adjusted EBITDA was $94.6 million and $34.5 million, respectively, representing a year-over-year increase of 174%.

(b)Reflects charges/(credits) related to litigation by stockholders, litigation related to de novo center, civil investigative demands, and arbitrationsettlement with our former pharmacy provider. Refer to Note 9, "Commitments and Contingencies" to our consolidated financial statements included in this Annual Report for more information regarding litigation by stockholders and civil investigative demands. Costs reflected consist of litigation costs considered one-time in nature and outside of the ordinary course of business based on the following considerations which we assess regularly: (i) the frequency of similar cases that have been brought to date, or are expected to be brought within two years, (ii) complexity of the case, (iii) nature of the remedies sought, (iv) litigation posture of the Company, (v) counterparty involved, and (vi) the Company's overall litigation strategy. For the year ended June 30, 2026, includes an aggregate $52.4 million of accrued loss for potential resolutions or paid settlements. For the year ended June 30, 2025, includes $10.1 million that was accrued in connection with the potential settlement of the previously disclosed stockholder class action.action and which was paid in fiscal year 2026.

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

(d)Reflects charges related to business optimization initiatives. Such charges related to one-time investments in projects designed to enhance our technology and compliance systems and improve and support the efficiency and effectiveness of our operations. For the year ended June 30, 20252026 this consists of $3.5 million of costs related to organizational restructure and executive severance.. For the year ended June 30, 2025, this includes (i) $2.5 million of costs associated with organizational restructure and executive severance, and (ii) $0.5 million related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the year ended June 30, 2024, this includes (i) $3.1 million of costs associated with third party consultants to implement core provider initiatives, assess our risk-bearing capabilities, and strengthen our enterprise capabilities, (ii) $0.3 million of costs associated with organizational restructure, and (iii) $0.9 million related to other non-recurring projects aimed at reducing costs and improving efficiencies.

(fe)For the year ended June 30, 2025, reflects $2.6 million impairment loss for the investment in DispatchHealth Holdings, Inc., partially offset by $1.3 million net benefit associated with the dissolution of the PWD partnership. For the year ended June 30, 2024, reflects $4.8 million net benefit associated with the dissolution of the PWD partnership partially offset by $2.0 million impairment in Jetdoc investment.

(gf)ReflectsFor the year ended June 30, 2026, reflects (i) additional loss related to the Company’s sale of its managing member interest in SH1 and the adjacent land and (ii) impairment charges related to ROU asset and construction in progress related to a previously planned de novo center in Downey, California. For the year ended June 30, 2025, reflects (i) impairment charges related to ROU asset and construction in progress related to halting developments related to a previouslythe planned de novo center in Louisville, Kentucky that the Company is no longer pursuing,center, (ii) loss on assets held for sale, and (iii) loss on settlement of lease liability in Louisville, Kentucky.

(hg)ReflectsFor the year ended June 30, 2026, reflects gain on sale of center equipment that was originally purchased for the center in Louisville, Kentucky. For the year ended June 30, 2025, reflects loss on sale of center equipment that was originally purchased for the center in Louisville, Kentucky.

We have financed our operations principally through cash flows from operations and through borrowings under our credit facilities. As of the years ended June 30, 20252026 and 2024,2025, we had cash and cash equivalents of $64.1$97.9 million and $56.9$64.1 million, respectively, an increase of $7.2$33.8 million primarily due to an increase in working capital partially offset by cash used in financinginvesting activities including sharecapital repurchases.expenditures. 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 A Facility (as defined below) due August 2028, (ii) finance and operating lease obligations, which are generally paid on a monthly basis and include maturities throughfrom calendar year 20252026 andthrough 2034, respectively,2039, (iii) the operations of our business, (iv) income tax payments, which are generally due on a quarterly and annual basis, (v) capital additions, which include acquisition and de novo centers, and (vi) share repurchases.repurchases, if any. We also will continue investing in resources and initiatives to provide necessary and quality services to our participants. Collectively, these obligations are expected to represent a significant liquidity requirement of our Company on both a short-term (next 12 months) and long-term (beyond 12 months) basis. For additional information regarding our lease obligations, debt and commitments, see Notes 6 “Leases,” 7 “Long-term Debt,” and 9 “Commitments and Contingencies,” respectively, to our consolidated financial statements included in this Annual Report.

As of June 30, 2025, the Credit Agreement consisted of a senior secured term loan (the “Term Loan Facility”) of $75.0 million principal amount and a revolving credit facility (the “Revolving Credit Facility”) of $100.0 million maximum borrowing capacity. Following the entry into Amendment No. 2 to the Credit Agreement on August 8, 2025, the Term Loan Facility was replaced by a $50.7 million term loan (the “Term Loan A Facility”) and the commitments with respect to the Revolving Credit Facility were renewed. The borrowing capacity under the Revolving Credit Facility is subject to (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 A Facility is paid each calendar quarter in an amount equal to 1.25% of the initial term loan on closing date.

InnovAge Holding Corp. (“InnovAge”) became a public company in March 2021. As of DecemberMarch 31, 2025,2026, the Company served approximately 8,0108,050 PACE participants, and operated 20 PACE centers across California, Colorado, Florida, New Mexico, Pennsylvania, and Virginia.

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

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

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

•Our participants. We focus on providing all-inclusive care to frail, high-cost, dual-eligible seniors. We directly contract with government payors, such as Medicare and Medicaid, through PACE and receive a capitated risk-adjusted payment to manage the totality of a participant’s medical care across all settings. InnovAge manages participants that are, on average, more complex and medically fragile than other Medicare-eligible patients, including those in Medicare Advantage (“MA”) programs. As a result, we receive larger payments for our participants compared to MA participants. This is driven by two factors: (i) we believe we manage a higher acuity population, with an average risk adjustment factor (“RAF”) score of 2.502.52 based on InnovAge data as of DecemberMarch 31, 20252026; and (ii) we have Medicaid spend in addition to Medicare. Our participants are managed on a capitated, or at-risk basis, where InnovAge is financially responsible for all participant medical costs. Our comprehensive care model and globally capitated payments are designed to cover participants from enrollment until the end of life, including coverage for participants requiring hospice and palliative care. For dual-eligible participants, we receive PMPM payments directly from Medicare and Medicaid, which provides recurring revenue streams and significant visibility into our revenue. The Medicare portion of our capitated payment is risk-based on the underlying medical conditions and frailty of each participant. We continue to strengthen our encounter data submission process so that our revenue more accurately reflects the acuity of the populations we serve.

•Our ability to maintain high participant satisfaction and retention. Our comprehensive individualized care model and frequency of interaction with participants generatesgenerate high levels of participant satisfaction. Our average participant tenure was 3.2 years as of DecemberMarch 31, 2025,2026, 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 7.0% annually over the last three fiscal years.

•Effectively managing the cost of care for our participants. We receive capitated payments to manage the totality of a participant’s medical care across all settings. The risk pool of our population is highly acute. Various factors, including increased salaries, wages and benefits, increased staffing, annual increases in assisted living and nursing facility unit cost and general medical inflation have affected our external provider costs and cost of care, excluding depreciation and amortization, which represented approximately 78%77% of our revenue in the sixnine months ended DecemberMarch 31, 2025.2026.

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

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

Capitation revenue. Capitation revenue was $239.6$251.5 million for the three months ended DecemberMarch 31, 2025,2026, an increase of $30.9$33.7 million, or 14.8%,15.5%, compared to $208.7$217.8 million for the three months ended DecemberMarch 31, 2024.2025. This increase was driven by a $14.5$19.0 million, or 6.4%,8.2%, increase in capitation rates coupled with a $16.5$14.7 million, or 7.9%,6.7%, increase in member months for the three months ended DecemberMarch 31, 20252026 as compared to the three months ended DecemberMarch 31, 2024.2025. The increase in capitation rates for the three months ended DecemberMarch 31, 20252026 was primarily driven by (i) ana 8.0%7.8% annual increase in Medicaid capitation rates as determined by the States partiallycoupled offsetwith bylower revenue reserve and (ii) a 4.1%5.0% increase in Medicare capitation rates. The increase in member months was primarily due to growth in our California, Florida, and Colorado centers.

Capitation revenue was $475.4$726.9 million for the sixnine months ended DecemberMarch 31, 2025,2026, an increase of $61.9$95.6 million, or 15.0%,15.1%, compared to $413.5$631.3 million for the sixnine months ended DecemberMarch 31, 2024.2025. This increase was driven by a $25.1$44.0 million, or 5.6%,6.4%, increase in capitation rates coupled with a $36.8$51.5 million, or 8.9%,8.2%, increase in member months for the sixnine months ended DecemberMarch 31, 20252026 as compared to the sixnine months ended DecemberMarch 31, 2024.2025. The increase in capitation rates includes ana 8.0%7.9% increase in Medicaid rates partially offset by revenue reserve and a 3.9%4.3% increase in Medicare rates. The increase in member months was primarily due to growth in our California, Florida, and Colorado centers.

External provider costs. External provider costs were $112.0$113.2 million for the three months ended DecemberMarch 31, 2025,2026, an increase of $4.1$5.4 million, or 3.8%,5.0%, compared to $107.9 million for the three months ended DecemberMarch 31, 2024.2025. The increase was driven by an increase of $8.5$7.3 million, or 7.9%,6.7%, in member months partially offset by a decrease of $4.4$1.9 million, or 3.8%1.7%, in cost per participant for the three months ended DecemberMarch 31, 20252026 as compared to the three months ended DecemberMarch 31, 2024.2025. The decrease in cost per participant for the three months ended DecemberMarch 31, 20252026 was primarily driven by a decrease in permanent nursing facility utilization,utilization and a decrease in pharmacy expense associated with the transition to in-house pharmacy services. The decrease in cost per participant was partially offset by an annual increase in assisted living and permanent nursing facility unit cost, and an increase in assisted living utilization, and an increase in inpatient unit cost.utilization.

External provider costs were $220.9$334.1 million for the sixnine months ended DecemberMarch 31, 2025,2026, an increase of $5.8$11.1 million, or 2.7%,3.4%, compared to $215.1$323.0 million for the sixnine months ended DecemberMarch 31, 2024.2025. This increase was driven by an increase of $19.1$26.4 million, or 8.9%,8.2%, in member months partially offset by a decrease of $13.4$15.2 million, or 5.7%,4.4%, in cost per participant for the sixnine months ended DecemberMarch 31, 20252026 as compared to the sixnine months ended DecemberMarch 31, 2024.2025. The decrease in cost per participant was primarily driven by a decrease in permanent nursing facility utilization and a decrease in pharmacy expense associated with the transition to in-house pharmacy services. The decrease in cost per participant was partially offset by an annual increase in assisted living and permanent nursing facility unit cost, and an increase in assisted living utilization, and an increase in inpatient unit cost.utilization.

Cost of care (excluding depreciation and amortization). Cost of care (excluding depreciation and amortization) expense was $74.9$77.7 million for the three months ended DecemberMarch 31, 2025,2026, an increase of $10.8$8.2 million, or 16.9%,11.8%, compared to $64.1$69.5 million for the three months ended DecemberMarch 31, 2024.2025. This increase was driven by an increase of $5.8$3.5 million, or 8.3%,4.7%, in cost per participant coupled with an increase of $5.1$4.7 million, or 7.9%,6.7%, in member months. The overall increase of cost of care (excluding depreciation and amortization) expense for the three months ended DecemberMarch 31, 20252026 as compared to the three months ended DecemberMarch 31, 20242025 was primarily driven by (i) a $2.0$1.8 million net increase in salaries, wages and benefits due to higher wage rates and cost associated with organizational restructure, partially offset by a reduction in headcount, (ii) $4.8$3.4 million in third party fees and shipping costs associated with in-house pharmacy services, and (iii) $3.2$2.0 million in contract services, and (iv) $0.7 million in fleet costs including contract transportation.

Cost of care (excluding depreciation and amortization) expense was $150.8$228.4 million for the sixnine months ended DecemberMarch 31, 2025,2026, an increase of $23.3$31.5 million, or 18.3%,16.0%, compared to $127.4$196.9 million for the sixnine months ended DecemberMarch 31, 2024.2025. This increase was driven by an increase of $12.0$15.4 million, or 8.6%,7.2%, in cost per participant coupled with an increase of $11.3$16.1 million, or 8.9%,8.2%, in member months. The overall increase of cost of care (excluding depreciation and amortization) expense for the sixnine months ended DecemberMarch 31, 20252026 as compared to the sixnine months ended DecemberMarch 31, 20242025 was primarily driven by (i) aan $6.4$8.2 million increase in salaries, wages, and benefits associated with higher wage rates and an increase in headcount,rates, (ii) $9.6$13.1 million in third party fees and shipping costs associated with in-house pharmacy services, and (iii) $5.3$2.7 million in contract services, and (iv) $6.0 million in fleet costs including contract transportation.

Sales and marketing. Sales and marketing expenses were $15.7$8.7 million for the sixthree months ended DecemberMarch 31, 2025,2026, an increase of $1.5$1.8 million, or 10.5%,26.3%, compared to $14.2$6.9 million for the sixthree months ended DecemberMarch 31, 20242025, primarily due to increased headcount,higher wage rates,rates and increased marketing spend to support growth.

Corporate, generalSales and administrative. Corporate, general and administrativemarketing expenses were $26.6$24.4 million for the threenine months ended DecemberMarch 31, 2025,2026, aan decreaseincrease of $1.5$3.3 million, or 5.3%,15.7%, compared to $28.1$21.1 million for the threenine months ended December 31, 2024. This decrease for the three months ended DecemberMarch 31, 2025 as compared to the three months ended December 31, 2024 was primarily due to (i)increased $1.1headcount, millionwage decrease in legal feesrates, and (ii)marketing $0.6spend millionto decreasesupport in consulting fees.growth.

Corporate, general and administrative. Corporate, general and administrative expenses were $56.9$76.5 million for the sixthree months ended DecemberMarch 31, 2025,2026, an increase of $1.2$37.9 million, or 2.7%,98.3%, compared to $55.6$38.6 million for the sixthree months ended DecemberMarch 31, 2024.2025. This increase for the sixthree months ended DecemberMarch 31, 20252026 as compared to the sixthree months ended DecemberMarch 31, 20242025 was primarily due to (i) $1.5 million net increase in employee compensation and benefits as the result of an organizational restructure and executive severance and an increase in headcountour litigation expenses related to the accrual for the various legal matters disclosed in Note 9, "Commitments and wageContingencies" rates,of partiallythis offsetForm by lower variable compensation associated with the restructure (ii) $1.5 million increase in contract services, and (iii) $1.4 million increase in software license fees. These increases in cost were partially offset by (i) $2.4 million reduction in legal fees and (ii) $0.6 million reduction in consulting fees.10-Q.

Other Income (Expense)

The Company and its subsidiaries calculate federal and state income taxes currently payable and for deferred income taxes arising from temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured pursuant to enacted tax laws and rates applicable to periods in which those temporary differences are expected to be recovered or settled. The impact on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. The members of InnovAge Senior Housing Thornton, LLC ("SH1"), InnovAge Sacramento, InnovAge Orlando, and InnovAge OrlandoTampa havehad or have, as applicable, elected to be taxed as partnerships, and no provision (benefit) for income taxes for InnovAge SacramentoSacramento, InnovAge Orlando, or InnovAge OrlandoTampa is included in the condensed consolidated financial statements. In addition, no provision (benefit) for income taxes for SH1 is included in the condensed consolidated financial statements through the date of the Company's sale of its partnership interest in SH1 on September 11, 2025. The Company entered into a joint venture called InnovAge Florida PACE II – Tampa on August 15, 2025 and its members elected to be taxed as a partnership. No provision (benefit) for income taxes for InnovAge Tampa is included in the condensed consolidated financial statements for activity occurring from joint venture formation date through the balance of the fiscal year.

During the three months ended DecemberMarch 31, 20252026 and 2024,2025, we reported an income tax expense of $0.7$0.2 million and $0.03$0.1 million, respectively. The increase of $0.7$0.1 million for the three months ended DecemberMarch 31, 20252026 compared to the three months ended DecemberMarch 31, 2024,2025, was primarily due to (i) our pretax book incomeloss recognized during the three months ended DecemberMarch 31, 2025,2026, as compared to pretax book loss recognized during the three months ended DecemberMarch 31, 2024,2025, (ii) a discrete item to account for the impact of the OBBBA, and (iii) the change in our valuation allowance.

The Company's management uses Center-level Contribution Margin as the measure for assessing performance of its operating segments. We define Center-level Contribution Margin as total revenues less external provider costs and cost of care, excluding depreciation and amortization, which includes all medical and pharmacy costs. For purposes of evaluating Center-level Contribution Margin on a center-by-center basis, we do not allocate our sales and marketing expenses or corporate, general and administrative expenses across our centers. Center-level Contribution Margin was $104.2$165.2 million and $71.6$112.4 million for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. The increase in Center-level Contribution Margin for the sixnine months ended DecemberMarch 31, 20252026 compared to the sixnine months ended DecemberMarch 31, 20242025 was primarily due to a 14.7%15.1% increase in total revenue, offset by a 8.7%8.2% increase in external provider costs and cost of care, excluding depreciation and amortization, during the same period. For more information relating to Center-level Contribution Margin, see Note 14 “Segment Reporting” to our condensed consolidated financial statements. A reconciliation of Center-level Contribution Margin to income (loss) before income taxes, the most directly comparable GAAP measure, for each of the periods is as follows:

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

We define Adjusted EBITDA as net income (loss) adjusted for interest expense, net, other investment income, depreciation and amortization, and provision (benefit) for income tax as well as addbacks for non-recurring expenses or exceptional items, including charges relating to management equity compensation, litigation costs and settlements, M&A diligence, transaction and integration, business optimization, impairments and loss on assets held for salesale, and gain on sale of assets. Adjusted EBITDA margin is Adjusted EBITDA expressed as a percentage of our total revenue. For the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, net income (loss) was $19.5$10.5 million and $(19.2)$30.3 million, respectively, representing a year-over-year increase of 201.4%.65.5%. For the sixnine months ended DecemberMarch 31, 2025,2026, net incomeloss margin was 4.1%,1.4%, as compared to net loss margin of 4.6%4.8% for the sixnine months ended DecemberMarch 31, 2024.2025. The increase in Adjusted EBITDA and Adjusted EBITDA margin was primarily due to (i) increased census,census and (ii) increased capitation rates and (iii) lower per participant external provider costs, partially offset by (i) increased center-level headcount and wage rates associated with census growth and a competitive labor market and (ii) increased costs associated with transition to in-house pharmacy services.rates.

Adjusted EBITDA and Adjusted EBITDA margin are supplemental measures of operating performance monitored by management that are not defined under GAAP and that do not represent, and should not be considered as, an alternative to net income (loss) and net income (loss) margin, respectively, as determined by GAAP. We believe that Adjusted EBITDA and Adjusted EBITDA margin are appropriate measures of operating performance because the metrics eliminate the impact of revenue and expenses that do not relate to our ongoing business performance and certain noncash expenses, allowing us to more effectively evaluate our core operating performance and trends from period to period. We believe that Adjusted EBITDA and Adjusted EBITDA margin help investors and analysts in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, including net income (loss) and net income (loss) margin. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by the types of items excluded from the calculation of Adjusted EBITDA. The use of the term Adjusted EBITDA varies from others in our industry. Effective for the year ended June 30, 2024 and going forward, the Company revised its calculation of Adjusted EBITDA to no longer exclude de novo center development costs and to reflect the impact of other investment income. The presentation for the sixnine months ended DecemberMarch 31, 20242025 has been recast to conform to the current presentation.

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

(b)Reflects charges/(credits) related to litigation by stockholders, civil investigative demands, and arbitrationsettlement with our former pharmacy provider. Refer to Note 9, "Commitments and Contingencies" to our condensed consolidated financial statements for more information regarding litigationthese by stockholders and civil investigative demands.proceedings. 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.

(d)Reflects charges related to business optimization initiatives. Such charges relate to one-time investments in projects designed to enhance our technology and compliance systems and improve and support the efficiency and effectiveness of our operations. For the three months ended DecemberMarch 31, 2025,2026, this consists of costs related to organizational restructure. For the sixnine months ended DecemberMarch 31, 2025,2026, this consists of costs related to organizational restructure and executive severance. For the three months ended DecemberMarch 31, 2024,2025, this primarily includes costs related to other non-recurring projects aimed at reducing costs and improving efficiencies. For the sixnine months ended DecemberMarch 31, 2024,2025, this includes (i) $0.4 million of costs associated with organizational restructure and (ii) $0.3$0.4 million related to other non-recurring projects aimed at reducing costs and improving efficiencies.

(e)For the sixthree months ended DecemberMarch 31, 2025, reflects loss on sale of center equipment that was originally purchased for the previously planned de novo center in Louisville, Kentucky that the Company is no longer pursuing. For the nine months ended March 31, 2026, reflects additional loss related to the Company's sale of its managing member interest in SH1 and the adjacent vacant land. For the three and sixnine months ended DecemberMarch 31, 2024,2025, reflects (i) impairment charges related to ROU asset and construction in progress related to halting developments to athe previously planned de novoKentucky center inand Louisville,(ii) loss on sale of center equipment that was originally purchased for the Kentucky that the Company is no longer pursuing.center.

(f)For the sixnine months ended DecemberMarch 31, 2025,2026, reflects gain on sale of center equipment that was originally purchased for the centerKentucky in Louisville, Kentucky.center.

We have financed our operations principally through cash flows from operations and through borrowings under our credit facilities. As of DecemberMarch 31, 2025,2026, we had cash and cash equivalents of $83.2$95.5 million, an increase of $19.1$31.4 million from June 30, 2025, and short-term investments of $42.8$43.1 million, an increase of $1.0$1.3 million from June 30, 2025. The increase in cash and cash equivalents and short-term investments was primarily due to timing of cash receipts for services provided. Our cash and cash equivalents primarily consist of highly liquid investments in demand deposit accounts and cash. Our short-term investments primarily consist of investments in mutual funds.

On March 8, 2021, the Company entered into a credit agreement (as amended, the "Credit Agreement") that consisted of a senior secured term loan (the “Term Loan Facility”) of $75.0 million principal amount and a revolving credit facility (the “Revolving Credit Facility”) of $100.0 million maximum borrowing capacity. On August 8, 2025, the Company entered into Amendment No. 2 to the Credit Agreement. Following entry into Amendment No. 2 to the Credit Agreement, the Term Loan Facility was replaced by a $50.7 million term loan (the "Term Loan A Facility"), the commitments with respect to the Revolving Credit Facility were renewed, and the maturity dates for both the Term Loan A Facility and the Revolving Credit Facility were extended. As of DecemberMarch 31, 2025,2026, we had $59.4$58.8 million of debt outstanding, which includes $50.1$49.4 million under our Term Loan A Facility and $9.4 million draw on our Revolving Credit Facility, each of which matures on August 8, 2028.

As of DecemberMarch 31, 2025,2026, we had future minimum operating lease payments under non-cancellable leases through the year 2039 of $33.3$31.7 million. We also had non-cancellable finance lease agreements with third parties through the year 2030 with future minimum payments of $12.3 million. For additional information, see Note 7, “Leases”, Note 8, “Long-Term Debt”, and Note 9, “Commitments and Contingencies” to our condensed consolidated financial statements.

Outstanding principal amounts under the Credit Agreement accrue interest at a variable interest rate. As of DecemberMarch 31, 2025,2026, the interest rate on the Term Loan A Facility was 6.24%.6.17%. Under the terms of the Credit Agreement, the Revolving Credit Facility fee accrues at 0.50% of the average daily unused amount and is paid quarterly. As of DecemberMarch 31, 2025,2026, we had $9.4 million of borrowings outstanding, $6.2 million of letters of credit issued, and $84.4 million of remaining borrowing capacity under the Revolving Credit Facility.

Our condensed consolidated statements of cash flows for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 are summarized as follows:

Operating Activities. The change in net cash provided by (used in) operating activities for the sixnine months ended DecemberMarch 31, 20252026 compared to the sixnine months ended DecemberMarch 31, 20242025 was driven primarily by $29.0$9.1 million increase in net income,loss, net of non-cash adjustments.adjustments, and a $10.5 million change in operating assets and liabilities driven by a change in accounts payable and accrued expenses.

Investing Activities. The change in net cash used in investing activities for the sixnine months ended DecemberMarch 31, 20252026 compared to the sixnine months ended DecemberMarch 31, 20242025 was primarily due to a $2.9$3.6 million increase in purchases of property and equipment to support growth. In addition, the prior year included $6.3 million in proceeds from the sale of short-term investments that did not reoccur in the current year, partially offset by $3.7 million in proceeds from assets held for sale that occurred in the current year.

Financing activities. The increase in net cash used in financing activities for the sixnine months ended DecemberMarch 31, 20252026 compared to the sixnine months ended DecemberMarch 31, 20242025 was primarily due to the $3.2 million contribution from the InnovAge Tampa JV partner and $5.9 million of share repurchases that occurred in the prior year and did not reoccur in the current year.

We qualify as an “emerging growth company” through the end of this fiscal year 2026 pursuant to the provisions of the Jumpstart Our Business Startups (“JOBS”) Act and as 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,” which will be through the end of this fiscal year 2026, 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.