Q4 2024 InnovAge Holding Corp Earnings Call
Speaker Change: Good day, and thank you for sending by. Welcome to the Innovates 4th Quarter 2020 for earnings conference call. At this time, participants are most in only mode. After the speaker's presentation, it will be a question to answer session. To have a question to answer session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Speaker Change: Please be advised that today's conference is being recorded. I don't know like kind of conference over to you for a bigger today. Ryan Kubota director of this relationship. Please go ahead.
Ryan Kubota: Thank you, operator. Good afternoon and thank you all for joining the NVH2024 Disco 4th Quarter and fiscal year-end earnings call.
Speaker Change: with me today's Patrick Blair, President and CEO, and bit Adams, CEO Fo.
Speaker Change: Today, after the market close, we issued a press release containing detailed information on our fourth quarter in annual results.
Speaker Change: You may access the release on the Investor Relations section of our company website, Innovages.com
Speaker Change: For those listening to the rebroadcast of this call, we remind you that the remarks made here in are as of today, Tuesday, September 10, 2024, and have not been updated subsequent into this call.
Speaker Change: During your call, we will refer to certain non-gab measures, or reconciliation of these measures to the most directly comparable gab measures can be found in our earnings press release posted on our website.
Speaker Change: who will also be making forward looking statements.
Speaker Change: including statements related to our full fiscal 2025 year projections.
Speaker Change: Future Growth Prospects and Growth Strategy are clinical and operational value initiatives.
Speaker Change: and Medicare raiding creases since this headwinds.
Speaker Change: the status of current and future regulatory actions and other expectations.
Speaker Change: Listeners are cautioned that all of our forward-looking statements involve certain assumptions and are inherently subject to risk and uncertainties that can cause our actual results that differ materially from our current expectations.
Speaker Change: We advise listeners to review the risk factor discussed in our annual report, informed 10K, for fiscal year 2024, and any subsequent reports filed with the SEC.
Speaker Change: After the completion of our prepared remarks, we will open the calls for questions.
Speaker Change: I would now turn the call over to our president and CEO, Patrick Blair. Patrick?
Patrick Blair: Thank you, Ryan, and good afternoon, everyone. I want to again by expressing my continued appreciation to our colleagues, participants, government partners, and investor community who's for innovation.
Patrick Blair: Today, we will provide several updates or financial results for the fourth quarter in full year fiscal 2020-4. Initial guidance for fiscal year 2020-5 in progress in our key focus areas.
Patrick Blair: Let me start with our fourth quarter performance.
Patrick Blair: Today, we reported revenue of approximately $199 million, a sequential improvement of approximately 3.3% compared to the third quarter. Center-level contribution margin was $36.6 million, which represents an 18.3% margin.
Speaker Change: has been we'll cover in more detail. We have revised our definition of adjusted EBITDA this year, resulting in fourth quarter adjusted EBITDA, of approximately $5.2 million, which represents a 2.6% margin.
Speaker Change: We finished the year with the census of approximately 7,020 just shy of the company's high watermark of 7,074 in midfiscal 2022.
Speaker Change: Our fourth quarter completes a solid year of operating in financial performance.
Speaker Change: Moving to full-year performance, we reported total revenue of approximately $764 million, and increase of approximately 11% compared to fiscal year 2023.
Speaker Change: Center-level contribution margin was approximately 132 million, which represents a 17.3% margin.
Speaker Change: year-old year, Center-level contribution margin increased by approximately 260 basis points.
Speaker Change: from 14.7% to 17.3%.
Speaker Change: Driven by Census Grove, Discipline Medical Cost Management and Administrative Cost Controls.
Speaker Change: Consolidated the adjusted EBITDA was $16.5 million under our revised presentation, which represents a 2.2% margin compared to negative $3.4 million in fiscal 2023, an improvement of approximately $20 million.
Speaker Change: Under the previous presentation, our fiscal 2024 EBITDA, would have been 19.8 million, which compares favorably to our four-year guidance of $12 to $18 million.
Speaker Change: We are proud of the strong year over your financial results, and the positive momentum as we move out of the rebuilding period of our transformation and into the next phase of responsible growth in margin recapture.
Speaker Change: To recap a few fiscal 24 operating performance milestones, we've exceeded our employee engagement participants satisfaction in quality targets.
Speaker Change: We acquired two California Centers. We executed a joint venture with Orlando Hill.
Speaker Change: We open two new state-of-the-art sinners in Florida.
Speaker Change: We further strengthened the essential care capabilities and areas such as Medicaid rate, actuarial soundness, risk or accuracy, provider network optimization, and medical cost management.
Speaker Change: We increase center utilization by 440 basis points in our established centers.
Speaker Change: We completed the epic EMR rule out in all 20 centers.
Speaker Change: and we sold a non-core senior living facility and reinvested in our core business.
Speaker Change: We outlined an ambitious agenda last year and we believe we delivered and proud of our team for their perseverance while keeping high quality compliant care as our top priority. We plan to do the same in fiscal 2025.
Speaker Change: We feel confident that we have created a differentiated and powerful platform for which to grow responsibly and profitably in fiscal 2025. And we believe we are on trap to achieve the full potential of the organization in the years to come.
Speaker Change: Turning now to our fiscal year 2025 guidance, we projected the census range of 7,300 to 7,750.
Speaker Change: Member months of 86,000 to 89,000
Speaker Change: Total revenue of $815 million to $865 million.
Speaker Change: Consolidated the Justice EBITDA of 24 to 31 billion dollars.
Speaker Change: and the noble losses of 18 to 20 billion dollars.
Speaker Change: We anticipate seeing improvement in our profitability of the year progresses in exiting the year with a higher rendering earnings.
Speaker Change: Consistent with the targets we provided are February and best today, we expect our adjusted EBITDA margins to reach 8 to 9% over the intermediate term. Then we'll take you through a more detailed fiscal 2025 guidance review a few minutes.
Speaker Change: Now I want to exist instead of road.
Speaker Change: We used fiscal 2020 Ford a test in Lurr. We launched a new telephonic inside sales team to handle the increased lead volume from our referral partners and digital marketing campaigns.
Speaker Change: We built new referral partnerships, which have created greater awareness of the past program and extended our reach into the communities we serve.
Speaker Change: We also optimized our digital campaigns which increase the volume and yield of qualified leans. And we invested in tools and technology to make our enrollment teams more effective and productive.
Speaker Change: However, as we mentioned on the last couple of quarterly calls, challenges persist with enrollment process in times in some states.
Speaker Change: Specifically, we have been experiencing state delays completing the level of care assessments required for enrollment in pace. We continue working closely for state partners to address these delays and are beginning to see improvement.
Speaker Change: Despite this headwind, we anticipate healthy overall top line growing and remain encouraged by robust me and for the pace model of care.
Speaker Change: While we remain confident that these challenges will be resolved, the exact timing is not clear, and the uncertainty is reflected in our guidance. Should these challenges debate more quickly than anticipated, we would expect modest upside to our senses this year.
Speaker Change: In our genital centers, we continue to make progress despite a slower start than we anticipated.
Speaker Change: Our new Cinders in Florida, our game attraction as we build awareness of pace and innovation.
Speaker Change: and in Orlando specifically, we have created a joint venture with the Lando Health consistent with our strategy to find new avenues for growth by establishing partnerships with leading health system brands and our communities.
Speaker Change: The partnership is in the early stages but works side by the potential and we're honored to be working with such an outstanding organization.
Speaker Change: In our new Crane Charles Center, we're beginning to see our enrollment trend up on a month-up of month basis and we're largely hitting the mark on our expectations.
Speaker Change: It's important to note that the full-year impact of these new centers will create additional year-over-year operating losses in fiscal 2025 as we work through the maturity curve each of these denovals centers.
Speaker Change: On the regulatory front, our focus is on bringing our California audits to conclusion.
Speaker Change: The San Bernardino State Audit commenced in March, and the Accidator of using Tisspain within the next two months.
Speaker Change: In Sacramento, we submitted our corrective action plan to the state in March and are still awaiting final feedback. Recall in March, CMS official closed its portion of the audit.
Speaker Change: Following the resolution of the audits and corrective actions in San Bernardino and Sacramento, we expect to resume discussions with the state regarding the reinstatement of our Downing and Baker Field expansion plans.
Speaker Change: Operation League, we remain laser-focused on delivering compliant, high-quality care with strong medical management and operating discipline at every center.
Speaker Change: To that end, our fiscal 2024 external provider cost PMPM increased by approximately 3% in an inflationary environment where poor health care cost trends significantly exceeded this level.
Speaker Change: This provides confidence that our operational and clinical teams are focused on the right levers which drive high quality care while reducing unnecessary utilization.
Speaker Change: While we implemented several new clinical value initiatives last year, we expect to see the full year impact this year, and what celebrate actions to drive continuous improvement in new initiatives in fiscal 2025.
Speaker Change: As we enter your two on the epic system, we are beginning to experience the benefits in care coordination, documentation, compliance and risk for accuracy.
Speaker Change: Further, we have introduced operational value initiatives or OVI's to complement our clinical value initiatives.
Speaker Change: These initiatives are focused on identifying value creation opportunities at the center level and the corporate SGNA level to drive staff productivity, operating efficiency, and improve vendor unit economics from better leveraging people, process and technology.
Speaker Change: The Foundation's for Operation Excellence are in place across the organization, now we must execute a little better every day.
Speaker Change: In closing, we continue to make tangible progress every quarter. We have more top and bottom line work to do, but we're pleased with our fiscal year 2024 performance and are confident in our fiscal year 2025 guidance.
Speaker Change: We view fiscal 2025 as an important year to achieving our long-term goals and you can expect the same execution focus that you've seen from this team for the last two years.
Speaker Change: Lastly, I want to extend my deepest gratitude to our more than 2000 employees who embrace our mission every day and enable our participants to have more healthy days.
Speaker Change: with that I'll turn it over to Ben. Ben?
Ben: Thank you, Patrick. Today I will provide some highlights from our fourth quarter in fiscal year and 2024 financial performance followed by our fiscal year 2025 guidance.
Ben: Starting off with fiscal 2024 highlights, I am pleased with our overall performance in our strong finish to the year.
Ben: The business's total revenue improved each quarter during the past fiscal year, and as Patrick and I have reiterated, we believe we are on the path to normalized margins over the intermediate term.
Patrick Blair: Starting with Census, we served approximately 7,020 participants across 20 centers as of June 30, 2024.
Patrick Blair: This represents an increase of 9.6% from 2023 and a 2.8% increase compared to the third quarter of 2024.
Patrick Blair: We reported 80,840 member months in fiscal 2024, a 4.5% increase compared to the prior year.
Patrick Blair: Total revenue increased by $11 per cent to $763.9 million for fiscal year 2024.
Patrick Blair: The increase was primarily driven by an increase in member months primarily due to the release of sanctions in our Sacramento California Center and at our Colorado Center.
Patrick Blair: and an increase in both Medicaid and Medicare capitalization rates.
Patrick Blair: Compared to the third quarter, total revenue increased by 3.3% to $199.4 million in the fourth quarter.
Patrick Blair: primarily due to an increase in member months, coupled with retroactive Medicare risk adjustment payments, recognized in the fourth quarter.
Patrick Blair: We incurred $403 million of external provider costs during the fiscal year, a 7.6% increase compared to fiscal year 2023.
Patrick Blair: The increase was primarily driven by an increase in member months, coupled with an increase in cost for participants.
Patrick Blair: The cost for participant increase was primarily driven by higher assistant living utilization and unit costs.
Patrick Blair: as well as an increase in costs associated with high utilization of professional services.
Patrick Blair: These calls were partially offset by a reduction in permanent nursing facility utilization.
Patrick Blair: For the fourth quarter of fiscal 2024, we incured $102.7 million of external provider cars.
Patrick Blair: A 2.7% increase compared to the third quarter.
Patrick Blair: The sequential increase was primarily driven by an increase in member months, coupled with an increase in patient and assisted living facility unit cars.
Patrick Blair: Costa Care, excluding depreciation and amortization, was $228.8 million for fiscal year 2024. A 7.8% increase compared to fiscal 2023.
Patrick Blair: The increase was primarily due to an increase in cost per participant, coupled with an increase in member months.
Patrick Blair: The increase in cost for participants was driven by an increase in salaries, wages and benefits associated with increased headcount to support growth and higher wage rates.
Patrick Blair: an increase in contract provider expense in California to support growth.
Patrick Blair: Increased fleet expense and contract transportation as a result of higher average daily attendance and increase in external appointments and higher fuel costs.
Patrick Blair: Increased building maintenance and security.
Patrick Blair: and increase in software life and speed.
Patrick Blair: and an increase in denovable occupancy and administrative costs, inclusive of the Concerto Acquisition in December 2023.
Patrick Blair: This was partially all said by a reduction in cost associated with third party audit and compliance support.
Patrick Blair: In the fourth quarter, cost of care increased 1.8% to $60.1 million compared to the third quarter. The increase was primarily due to an increase in the head count and contract providers in California.
Patrick Blair: Central-level contribution margin, which we define as total revenue less external provider costs and costs of care, excluding depreciation and ammerization.
Patrick Blair: which includes all the medical and pharmacy calls.
Patrick Blair: was $132.1 million for fiscal year 2024. A 30.4% increase compared to fiscal year 2023.
Patrick Blair: As a percentage of revenue, our Center-level contribution margin ratio increased approximately 260 basis points to 17.3% compared to 14.7% in the prior year.
Patrick Blair: For the fourth quarter, Senator level contribution margin was $36.6 million, compared to $34 million in the third quarter.
Patrick Blair: As a percentage of revenue, center-level contribution margin increased approximately 70 basis points.
Patrick Blair: 18.3% compared to 17.6% in the third quarter.
Patrick Blair: Sales and marketing expense was $25 million for fiscal year 2024.
Patrick Blair: and increased of $5.3 million compared to fiscal year 2023.
Patrick Blair: The increase was primarily driven by increased marketing spend and an increase in salary wages and benefits associated with increased headcount.
Speaker Change: Both of which were associated with the release of sanctions at our Colorado in Sacramento California Senators.
Speaker Change: and the opening of our new Tampa and Orlando centers in Florida.
Speaker Change: In the fourth quarter, sales and marketing expense was $6.5 million, a decrease from approximately $600,000 compared to the prior quarter.
Speaker Change: The decrease was primarily due to lower marketing spend in the quarter as we continue to refine our digital strategy and focus on lead quality.
Speaker Change: This follow-up the increased marketing spend in the third quarter for our newly open Tampa Center and recently acquired Crenshaw Center.
Speaker Change: Corporate General Administrative Experts decreased to 111.3 million dollars, a $4.3 million decrease from a pair to fiscal year 2023.
Speaker Change: The decrease was primarily due to reductions in third-party legal expense and insurance expense.
Speaker Change: Consulting costs associated with improving organizational capabilities, including our transition to Africa, a reduction in contract staffing, and lower recruiting experience.
Speaker Change: The decrease was partially offset by costs associated with an increase in headscanot, bad dead expense, and consulting costs, including socks compliance, internal audit support, and public relations.
Speaker Change: Corporate General and Administrative expense increased to $29.6 million in the fourth quarter. A $2 million increase compared to the third quarter.
Speaker Change: The increase was primarily due to an increase in third-party legal expense, partially offset by a reduction in D&O insurance expense.
Speaker Change: We reported in that law of 23.2 million dollars in fiscal 2024.
Speaker Change: compared to a net loss of $43.6 million in fiscal 2020-2030.
Speaker Change: On a per share basis, we reported in that loss of 16 cents compared to 30 cents in fiscal 2023.
Speaker Change: For the fourth quarter, we reported in that loss of $2.3 million, compared to a net loss of $6.2 million in the third quarter.
Speaker Change: We reported that that was per share of one sentence on both the basic and deleted basis.
Speaker Change: and our weighted average share count was approximately 136 million shares for the quarter on both a basic and fully-deluted basis.
Speaker Change: Effective for fiscal 2024, we revised our calculation of adjusted EBITDA to reflect the impact of other investment income, and to no longer exclude denoboscenters development costs.
Speaker Change: We believe this revised presentation more closely reflects our operating core performance as we return to growth.
Speaker Change: All members for prior periods have been recast to conform to this revised presentation.
Speaker Change: Piscally year 2024, Jeff to the EBITDA, was $16.5 million, compared to an adjusted EBITDA loss of $3.4 million in fiscal 2023. And approximately $20 million improvement.
Speaker Change: Our Justice EBITDA margin was 2.2% for fiscal 2024 compared to an adjusted EBITDA margin loss.
Speaker Change: of 0.5% in the prior fiscal year.
Speaker Change: We reported it adjusted even though $5.2 million for the fourth quarter compared to $3 million in the third quarter.
Speaker Change: and our adjusted EBITDA margin with 2.6% for the fourth quarter compared to 1.5% in the third quarter.
Speaker Change: under the previous presentation.
Speaker Change: Our fiscal 2024 EBITDA would have been $19.8 million.
Speaker Change: which compares favorably to our full-year guidance.
Speaker Change: of $12 to $18 million.
Speaker Change: Denobo losses which are not included in our adjusted EBITDA calculation and which we define as net losses related to pre-opening and startup ramp through the first 24 months of Denobo operation.
Speaker Change: We're $12,000 for fiscal 2024, and primarily related to our centers in Florida and the recently acquired Baker's Field and Crenshaw Center.
Speaker Change: This compares to $4 million of Denogo losses in fiscal 2023.
Speaker Change: for the fourth quarter, to know what losses were $4.2 million compared to $4.1 million in the third quarter.
Speaker Change: Turning to our balance sheet, we ended the quarter with $56.9 million of cash in cash or equivalent, plus $45.8 million in short-term investments.
Speaker Change: We had 83.3 million dollars in total debt on the balance sheet.
Speaker Change: representing Death Under our Senior Secured Terminal, plus Finance, Lease obligations, and other commitments.
Speaker Change: For the fourth quarter, we recorded cash flow from operations of $1.9 million.
Speaker Change: at $3.3 million of capital expenditures and repurchased approximately 45,000 shares of our common stock for an aggregate of approximately $225,000.
Speaker Change: Under the company's $5 million share repurchased plan.
Speaker Change: Regarding our fiscal 2025 guidance, which we included in today's press release.
Speaker Change: Based on the information as of today, we expect our ending census for fiscal 2025 to be between 7,300 and 7,750.
Speaker Change: and member months to be in the range of 86,89,000.
Speaker Change: We are projecting total revenue in the range of $815 million, $865 million.
Speaker Change: and it's just an EBITDA in the range of $24 million to $31 million.
Speaker Change: Finally, we anticipate that the Nobel losses for fiscal 2025 will be in the $18-$20 million range.
Speaker Change: I will also provide some additional color on a few of the components that comprise our guidance assumptions.
Speaker Change: Starting with revenue, as a reminder, our Medicaid rates are based on county specific rates that are adjusted by CMS and January, coupled with prospective risk or adjustments in January and July.
Speaker Change: For Medicaid, our rates are contractually determining based on costs for pace or comparable populations in each day.
Speaker Change: Additionally, in fiscal year 2025, we are updating our reporting methodology by reporting bad debt as a country revenue item, rather than as an expense.
Speaker Change: Our fiscal year 2025 guidance takes this updated reporting methodology into account.
Speaker Change: and we are expecting a combined mid-single-digit rate increase, comprised of the following.
Speaker Change: A low single digit Medicare Part C increase.
Speaker Change: A mid-single digit Medicare port D increase.
Speaker Change: and for Medicaid amid single digit rate increase, inclusive of an 8.8% increase in Colorado, which includes funding for assisted living and nursing facility unit cost increases effective July 1.
Speaker Change: 2.5% in Virginia
Speaker Change: and estimated low single digit rate increase in California, affected January 1, 2025.
Speaker Change: and an estimated mid-singual digit rate increase in Pennsylvania, effective January 1st.
Speaker Change: We do not anticipate a rating increase in New Mexico at this time.
Speaker Change: Finally, some thoughts on cost and care external provider costs in overall center-level margin.
Speaker Change: We've made demonstrable progress in the business over the course of fiscal 2024.
Speaker Change: As we highlighted during our Vester Day back in February, we believe that in the intermediate term, we can achieve a Justin E. Bidom margins in the high-signal digits.
Speaker Change: We continue to focus our efforts on maintaining high quality and compliance standards.
Speaker Change: while working diligently to offset annual cost trends with ongoing clinical value initiatives and our new operational value initiatives that Patrick touched on in his remarks.
Speaker Change: Our fiscal 2025 guidance factors in the strong foundation we've laid for ourselves in fiscal 2024. The initiatives we are implementing to offset annual cost treatment.
Speaker Change: and the temporary census headwind that Patrick highlighted, driven by state processing delays.
Speaker Change: which we believe create a compelling and achievable margin growth story towards our target of high single-digit adjusted EBIT dot margin over the intermediate term.
Speaker Change: We continue to make significant investments in the business, including updating our financial systems to Oracle while maintaining a discipline approach to cost and being ever mindful of providing high quality service and compliance in each of our centers.
Speaker Change: In closing, we believe we are continuing to make improvements to the business every quarter. We remain focused on day-to-day operational execution, and continuing the earnings momentum, we laid the groundwork for in fiscal 2024.
Speaker Change: Operator, that concludes our prepared remarks. Please open the call for questions.
Speaker Change: Thank you and at this time we will conduct a question and answer session. As a reminder to ask a question you will need to press star 1-1 on your telephone and wait for a name to be announced. To withdraw your questions please press star 1-1 again. Please send by with the reply to Q&A roster. One moment for our first question.
Speaker Change: Our first question, I'm confident of Jason Kassorla from City, your line is open.
Jason Kassorla: Great, thanks. Good afternoon. It sounds like you're expecting a more linear progression on EBITDA this year, or for fiscal 25, but maybe can you just give us, can you just walk us through those puts and takes, this sounds like that's driven more on the fixed cost leverage or census continuing to build throughout the year. And then separately, are there any one time items inside that 16.5 million of EBITDA for fiscal 24 that we just need to contemplate as we think about growth for the 25 guidance range, or is that 16.5 up pretty clean kind of baseline number of a jump off in your view.
Ben Adams: Sure, hey, it's been Adams.
Ben Adams: It's sort of breaking it apart, I guess, I would think about the guidance for next year is very much of kind of a building off of the growth trends that we've seen this year. If you think about our census numbers in our member months.
Speaker Change: You know, we've actually now had almost an entire year post-fansions of...
Speaker Change: You know, pretty good enrollment trend, so we've actually got a pretty good handle of what's going on.
Speaker Change: We've spoken a little bit in the past about some of the state processing delay that we've had, and so we factor those into the trends that we've seen in the business going forward, and so what you see there is very much a building off of.
Speaker Change: of the trends that we've seen this year. Obviously, we've got a couple of new Dinovo centers that are rolling into those numbers to a lesser degree, but it's very much for trend-based analysis.
Speaker Change: I think if you look on the revenue side I think we talked about some of the guidance we had in there about Medicare Part C Part D rates and also what's going to state Medicaid rates.
Speaker Change: I think you know you think about those generally as kind of like mid-single-digit rates. So the delta between that and the revenue growth is really built off of volume for the most part. And then we're thinking about...
Speaker Change: Evidda, obviously, you know, we go through sort of a center by center of build up. There are some assumptions in there that Patrick may want to comment on here around OVI's and CVIs.
Patrick Blair: We have a lot of success last year, we are clinical value initiatives, so we've got a whole new set of them rolling in this year, as well as a number one, the operational side, which we call OBI's.
Speaker Change: So, what we see in the guidance.
Speaker Change: is basically an expectation about how those are going to mature over the course of the year.
Speaker Change: So, and then the last thing I would say in terms of, uh...
Speaker Change: to know the losses, obviously, you know, we've got, you know, basically four new centers that are in various states of maturity. And we've got a pretty good handle with the run rate of those expenses are going to be like over the next year.
Speaker Change: and so those are basically just built off of those assumptions for those to know of those centers. So it's a pretty straightforward build in terms of the analysis going forward. I think we feel pretty good about the range we put out there.
Speaker Change: Okay, great. Thanks. Maybe just a little bit more color. I know you kind of put up that three and a half percent or so margin target midpoint of guide.
Speaker Change: I guess, can you give us a little bit more on how you're thinking about that target relative to the 8 to 9% in a immediate that you gave at your investor day. I guess it's just, would you expect a little bit more of a J-curve that I ramp in the margin director of the business in the 26th and beyond? Just kind of like, you know, thinking about how that positioning kind of your margin expectation for this year against.
Speaker Change: and the growth in the expectation for eight to nine percent of our time. Yeah, sure. So when we look at...
Speaker Change: So we think about the margin progression over time, and we went through our investor day, I guess it wasn't February. I think we talked about getting to sort of an 8 to 9% margin range over the intermediate term, which we kind of defined as two years, the four years.
Speaker Change: and so I would just look at it and basically say
Speaker Change: We stand by that ramp, you know, where we are today is very much sort of a stop along the journey.
Speaker Change: We think it'll probably progress pretty linearly over that period of time.
Speaker Change: and as we sort of look at where we are right now and how the business is trending and what we think is going to happen next year. It's feel like we're tracking right according to expectations for that target. So again, I think that two to four years from the investor day is probably the right time frame to look at.
Speaker Change: and whatever we are six or eight months beyond that investor day.
Speaker Change: Now I would just say that we're just providing fiscal year 25 guidance today, but as the year develops, we'll have increasing visibility in fiscal year 26 and the slope of the margin recapture, and we'll be sure to keep everybody informed of how that progresses.
Speaker Change: Great thing, so I'm like, it's freaking one more, can you give us a sense of understanding right, just 24 revenue with the bad debt change?
Speaker Change: I guess just kind of if you do the back of the envelope math it would suggest like aggregate PMPMs are only up slightly for 2025.
Speaker Change: but you kind of fly to a missing of the great increase. Curious like what if a Q&A has a damping effect on that as you're bringing on new members, just any color in and around that, I guess we think about bottling for this character. Yeah, let me give you some general guidance here.
Speaker Change: If you go back, well, the simple answer is basically this doesn't affect profitability, this is strictly moving and the geography of an expense of the income statement, so instead of being...
Speaker Change: if you can experiment with him down below.
Speaker Change: is going to be contravening you in the future. If you were to look at that expense, you know, related to 2024, you know, think about a number that's probably in, kind of like a $67 million range.
Speaker Change: So if you were trying to go back in just 2024 to sort of put on Apple's Apple's basis so you could look at the growth rates.
Speaker Change: Think of like a 6 to 7 million dollar number as an adjustment to 24 and then the guidance we gave you to 25 and then also that you can compute an Apple Apple's growth rate.
Speaker Change: and when you think about what's going on there, there's nothing really related to the cutie of the population or anything else going on other than...
Speaker Change: is just being booked as contra-revenue now because in consultation with our auditors, because of the characteristics of the bad debt expense they just view it as under six or six is a contra-revenue item now.
Speaker Change: Okay, awesome. Thank you for the color.
Speaker Change: Thank you, one more way for our next question.
Speaker Change: and the next question of conflano John Stanfo from JP Morgan Securities, your line is open.
John Stanfo: Great, thanks for taking the question. Just a quick one on cadence of enrollment. You know, obviously.
John Stanfo: with some of the enrollments trending up in St. Crenshaw. How are you thinking about the balance of membership ads across the year? And then conversely, the cadence of Denobo losses for that 18-20 million headwind to just leave it up.
Speaker Change: I'll start with the enrollment that you added.
Speaker Change: from NERP.
Speaker Change: you know in terms of how we expect the enrollment to come in, you know, I don't see a lot of differs between
Speaker Change: this year, 24 in fiscal year 25, you know, we still expect the preponderance of our enrollment to come associated Californian in Colorado, in particular, are three new centers in Tampa or Leandroe, and Chris Shaw are still ramping up.
Speaker Change: and we are pleased with the traction we're starting to see.
Speaker Change: in all those markets. Admittedly Ford is taking a little longer to get to the ramp that we're seeing now and that we've learned a lot about, you know, denobos, these are our first denobos.
Speaker Change: and several years, we're starting to see that progress that we expected the last couple of months, and we're excited about our partnership with Orlando Health, you know, in particular. And so I feel like the, you know, the enrollment's going to track pretty much the way it did in fiscal year 24.
Speaker Change: Yeah, and I would just say your question about denobo losses, I would just think them as kind of being spread generally over the course of the year. You know, these facilities are up and running, you know, they change slightly quarter quarter, but in terms of modeling purposes, just thinking of this kind of a linear progression.
Speaker Change: and of course the year.
Speaker Change: and then I know you called out and get a mid-single digit increase in Medicare Part D. Is there anything you'd highlight as we enter a calendar 2025 around IRA impacts to how you're thinking about that set of business.
Speaker Change: I don't think so. I think that the guide is sort of what it is on that.
Speaker Change: is probably how I think about it from my own perspective.
Speaker Change: Thank you.
Speaker Change: Thank you, and once again, that's Star 101 for questions, Star 101. One moment for our next question.
Speaker Change: Our next question of Coffeline, Jared Hass, from William Blair, your line is open.
Jared Hass: and I think they're taking the questions. Maybe just a quick follow up. I just wanted to clarify the sort of state delays or the headwinds that are still impacting the census growth.
Jared Hass: Just to clarify, that also kind of related to Medicaid re-determination largely. I think that was the case last quarter, which is wanted to check on that. It seems like...
Speaker Change: You know, as we get closer to the end of that wind-down process that should clear up in relatively short order, is that something you would agree with, and then also where those delays still kind of limited to certain markets are you seeing that kind of broad-based across the different states that you operate in.
Speaker Change: Yeah, the first question I think you're right. I think we're sort of seeing the last in the last of the impacts of re-determination. I think the challenges we're experiencing as I said in my opening remarks are more related to sort of the throughput and the long, the level of care assessments.
Speaker Change: the State's Perform.
Speaker Change: as a final stage to enrollment. We've seen through delays.
Speaker Change: I wouldn't say that it's widespread, but it is impacting us in some of our larger states where we see most of our gross enrollment volume in a month and so we've made great progress I think since the last quarter, but there are still vestiges that we've got to work through.
Speaker Change: I think that our guidance appropriately reflects what we know today and should we make some progress there. We're going to hopefully see some upside to our gross enrollment for the year.
Speaker Change: Okay, that's great and maybe I'll take a step back and that's a bigger picture of question.
Speaker Change: You know, we've seen some signs of health systems kind of increasingly getting interested in launching pace programs and you know, I'm thinking specifically about the Kaiser Venture in California is one example. How are you thinking about that dynamic, I guess both in terms of maybe a source of competition in the market itself, the students kind of look.
Speaker Change: to launch to know those, or potentially, as an unlock to continue to be that partner of choice for joint ventures. You know, just obviously given the scale and the clinical investments and the expertise that you have in terms of this market.
Speaker Change: You know, you know, I'd say first of all, we're very encouraged by the interest in pace and, you know, the move by Kaiser to inter-pace.
Speaker Change: is from our perspective, very welcome, you know, the notion of competition in the past.
Speaker Change: is primarily relevant in California, where they allow more than one piece program.
Speaker Change: to operate in a particular territory, and that's relevant to Kaiser's first on-tray. But as you know, in most other states, the territories are in essence exclusive.
Speaker Change: and so I don't think that we do it necessarily as a significant source of competition, but rather a very reputable organization seen a business opportunity with a large business across the U.S., and that's you have a very positive impact on building pace awareness and we look forward to working closely with them in all the other pace programs to go to awareness for pace.
Speaker Change: but it really does, I think, validate the model and at the same time it takes a lot of time for, you know, pace programs from the point of expressing interest to, you know, operating up.
Speaker Change: you know, a viable program. So, we view ourselves as in many ways, you know, early market leader and are continuing to see a significant opportunity. More competition is only going to build awareness for a wonderful program.
Speaker Change: got it. That's super helpful. Thanks for all the color.
Speaker Change: Thank you. And with that, this includes a question and suggestion. Thank you for your participation today's conference. This does include the program. You may now disconnect everyone. Have a great day.
Speaker Change: Thank you for watching.
Speaker Change: and his family.
Speaker Change: [inaudible]
Speaker Change: [inaudible]
Speaker Change: [inaudible]