Clover Health Investments (CLOV) 5 Aug 242024 Q2 Earnings call transcript

Ladies and gentlemen, good afternoon, and welcome to the Clover Health Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. And as a reminder, today's call is being recorded. I would now like to turn the call over to Ryan Schmidt, Investor Relations for Clover Health. Please go ahead, Mr. Schmidt.

everyone. afternoon, Good

Officer. our quarter on Chief to the Chief discuss Officer; Joining results call are second Financial company's the XXXX Peter Health's Andrew company's and me Kuipers, today Toy, Executive Clover

website. slides the You can find This our Investor in press will release webcast of Investor Clover is and section section at and the in a be accompanying Presentations replay and Events website the the today's Health supplemental of investors.cloverhealth.com. being Relations recorded, available

Risk like you that SEC forward-looking those subject most measures including measures, a to Form caution Information also Factors report cause statements on SEC our to website. materially of during future and financial can about to available found uncertainties, non-GAAP the section actual make I'd we reconciliation may may differ annual about measures from to of XX-K that and a Factors earnings expectations recent today's other are -- materials our expectations filings. in filings, on GAAP that our results be in performance. including are call including in referenced risks detailed the

now I'll call over turn to Andrew. the that, With

our our identify improve overall enables drive that to focus that to Care insurance and chronic care pleased plan our as operations. for our is Underlying that of core everyone and Today, our platform goal. Ultimately, strong we're of year call. guidance, very momentum. full improved and Thank Ryan, financial total We members results physicians you, profitability meaningful to this our is from thanks set another disease well manage Assistance report joining strong as driven results improves financial outcomes by cost these therefore, earlier. believe

our AI MA our and cost believe At and plan. managing chronic results clinical model is physicians is care the technology in demonstrate own outcomes with at working diseases. our of for total We with financial that data-driven Clover, that people differentiated developed we

Next, we who via other approach offering intend well. plans to our to counterpart bring our physicians serve as

begin performance. some takeaways me On quarter that high-level our let second from note, with

First, positive very by the this net highlighted quarter, to we a We're milestone. company. have increasing well for as as first achieved achieved meaningful adjusted time public profitability proud EBITDA as this income our

we Given this profitability EBITDA Peter to basis an results, which fully to you expect these year strong guidance update call. on performance, reflect deliver through are this full to and year will adjusted in our the later walk happy

revenue core with Second, we've in top line improvement margin again delivered further offering. growth double-digit our insurance

driving meaningful ability Our this adjusted year. consistent, profitability Advantage our impressive to is deliver performance EBITDA Medicare

upon from Third, our sheet, allowing our strength. performance improves us already of position operate healthy balance a to

meaningful to We to self-fund our phase of growth be expect business. the next able in

half plan on the continue a PPO meet more plants within of HMO to of us Unlike Lastly, allows addressable fundamentally to an funnel entirely our and rely other that results strong chassis. highlight almost Medicare unique to the to total ability our first to approach profitable different market. narrowing specific Advantage doctors, needs operate is our on a networks patients their

any with work improving care. outcomes is total of our to us and doctor, for cost allowed technology capability model. their patented and crucial proprietary PPO both Assistant Clover clinical This

precisely great physician is PPOs. to network strategy brings Medicare build Our wide technology why on health This beneficiaries. that anchored care to all vision is is enablement our

This preference results narrowing is care continue are doctors to struggle not not the the executed is consumer that want cost In other PPOs organizations people that have PPO. industry pick in to insurance management most drive easily expect less HMO frameworks used within traditional selecting them. we the broader simply, contrast, control. the to choose doctors, on network freedom pressures. there for cannot Plans balance to definitionally why to is managed to as challenge network cost rely their value-based Put doctors plans, their with selective managing for their own

managing network problem We aim better For AI-powered this not manage as as and quality, we do clinical of managing proven a by chronic solve on platform care narrowing, improve total but physicians to diseases cost this software outcomes. Clover, focus identifying possible. to by through with by our early and equipping

regulatory with for Coupled a shifting moat positioned changes differentiated that clinical preferences. success consumer high-touch challenges Home model Clover despite uniquely believe our Care's capabilities, broader creates and us care in growth our business industry we sustainable from and

CA, importantly, and our developed. clinical quarter, progression interactions several very improving about with heart better last manage results. to technology we've disease to severity help this physicians better excited innovation, constantly featuring CHF. includes identify physician we around from Most we're capabilities and Since and enhancements learning drive are clinical This

We're document and their also data around help to workflows care LLM streamlining the allow gap of AI them features on beyond quick like robust And available us workflow features and quickly deploy in EHR. of and iterate summarization allow to physician easily leverage to and for what's quality Assistant's prototyping quickly life. and ambient and focused that clinician closure, scribing sources implementation access finally,

With returning we investment focus membership believe growth. our generating profitability meaningful we our our top in as continued sustainable, MA overall in will to on continue momentum both and that assisted we business development, platform line

in plan that EBITDA additive, guidance. be great our any and insurance we but is yet to profitability alone. It's impact considered making our out drive expect our adjusted note to this will year counterpart meaningful not progress building future in We're from offering financial also important

this partnerships has works. cited product we pipeline issues utilization fit and MA to continued a headwinds in robust we unique more the believe That over that other market have said, since and a have strong our market year. the market broader for launching receive We potential interest with past offering, in platform

book differentiated technology strong to strong that then our plans My which a our quality. counterpart. advantage the customers. serves our point, this kick key unique for drive on better To is to that offering, MA a That, of in leveraging our business, drive in should as third-party Clover insurance customers validation cycle, powerful validates with turn, and our virtuous own to pitch started internal results is third-party belief a we results

both is complementary expectations and SaaS a we and and build builds offering, other. out We're upon piece plan services specific continuing the share and to to date. financial Each guidance tech-enabled later this at interconnected more and

Before handing it financial plan thinking to Peter we how the are I'll about growth. touch on for update, MA

this full our returning results first focus a our has deliver and reminder, strongly our executing retention the goals half position and margin upon in us As year. during cohorts. been on XXXX member against for We're to improvement these

more competitor information and CMS' our design off and growth. we recalculation is approach holding strategy to X.X rating growth we're details flexibility That of exciting resulted said, on reinvest benefit in go-forward to available. have XXXX now our has help For bids, in drive until to in shift PPO recent an stars, as more star sharing our plan specific industry up

were to our It's we the plan that from markets star also recalculation. only a primary note to get important increase in this rating

and next we pricing positioning to Our have grow next while year revenues and underlying insurance the year to the our performance momentum. feel out, we'll business we've our intent line about increased good of XXXX but to our positioned to profitability. market, in to how plays top see Ultimately, build simultaneously is on competitive long-term drive excess continue our very how cohort economics improving

I Peter. pass to it With will now that, over

Andrew. you, Thank

the framework I notes few and AI is improving the settled simultaneously to I'm improve that results, my with lives power business momentum like of of unique Before its industry-leading diving of diseases, be perspective, steadily that from an an as am a the company to by created on business the people role. very time would into and has Clover chronic continually I company. at I a my a impressed profile, opportunity. our profitability general to I'm Overall, such pleased talent scalable our attractive financial believe quick and into company and I've while technology, building part share join exciting to excited

technology SaaS offering. our I'm counterpart by of opportunity tech-enabled also use expand and to excited proven through our health services the the

guidance the review earnings full our improved will Clover's and year Turning back strong. cover to financial then our fundamentals first XXXX. quarter -- as conference. second core I I for highlights

from quarter public first a net Andrew was mentioned, as income quarter operations the second As Clover's continuing company. GAAP positive

profit Second as loss million quarter GAAP in was a the of net of quarter net $XX second compared $X to a million income of GAAP last year.

by in of adjusted SG&A. million improved a $XX to on driven the strong of Similarly, planned have year-over-year continued quarter focus profile, and MA this year. adjusted our momentum improved last $XX profit quarter year compared second we second significantly of EBITDA to optimizing in profitability the a Year-to-date, million

significantly 'XX. guide incorporated a capability As year for our our outlook, into half year improve first to full result, adjusted EBITDA profitability we've full this

to or metric BER. shared As expenses by that insurance standards. the a align insurance introduce in This to and premiums. improvement would further insurance transparency defining claim and industry of quality a insurance calculate operational we performance our by quarter, better benefits insurance we improve costs reminder, BER medical the expense sum total ratio the with is new We last

expense care not within calculation, these costs related believe health calculation accurately EBITDA in including we enhancing shift quality engagements. quality way, our affect that does ] the and BER our more reflecting care to also health adjusted any The investments of the memory as in numerator quality by in [ our improvement We are SG&A.

better quality comparability of and care true our into performance the peers. captures versus better provides for enhancing our ratio This maintaining and cost industry members the of

coupled to of in quarter, top in member XX.X% was outside $XXX During second XXXX second in return intra-year the year. XX% AEP. quarter by $XXX growth to and insurance a quarter the growth of cohort driven quarter the economics at unit to last the BER also line strong million, strong improved of XX.X% XXXX. second to to XX.X% growth in revenue year-to-date the with organic margin XX% as of second from continued performance XX.X% retention, quarter million year-over-year insurance second in improved to compared MCR

which On BER and MCR of XXX was a of basis, XX.X% XX.X%, represent basis both improvements strong of year-over-year. over points year-to-date

from returning earlier. this the economics core that plant periods operations unit During MA and member with retention on both benefited touched maturation the of strong continued our on we Andrew year, focus

XXs current percentage in mid year experienced also That as levels. development. depressed period a BER XXXX to be said, on full after in year-to-date on both prior XQ period full lower development to we XX% aforementioned the as in year-to-date the prior well both [indiscernible] between We've XX% the BER a expect basis normalizing land and which basis. revenue has for year for the on and

Of undefined note, by the elevated by of result still IBNR levels.

As the health normalization expect to our start of call, care transition our due changed disruption XXXX. by year-end. was at this ecosystem IBNR we new MA our and last and continue to the during plan a -- to is mentioned A levels

year-over-year, compared X% million. comparable down front, during $XX down a adjusted adjusted SG&A SG&A higher while quarter, total XX% the SG&A was year-to-date than On was second down to was period. modestly X% SG&A $XXX total as of the was same SG&A the in the period XXXX. On of spending and million basis,

million to operational transition. inventory claims year-to-date in increase care Our result continue and temporary results a estimates we quarter the the of include disruption accounting our related first XXXX internal changed as to the reserve of during health plan approximately a $X.X flagged MA

processing continues normalize the the we our expect throughout accounting As feasibility serve year, to [indiscernible]. we

partially and SEP Furthermore, OEP increased the last driven cost-saving operational strong costs and growth with ecosystem year, announced by favorable from growth. workforce impact [indiscernible] rationalization our our initiatives year-over-year both periods by new associated offset

last full the achieve for versus year Looking to during our year half adjusted of That on EBITDA business second the build adjusted reinvest said, year. expect performance SG&A opportunity strategically half the first the any to ahead, we foundation growth long-term meaningful profitability savings we to remain of we have, the strong light year to sustainable growth. our and into a now track of

adjusted As the at the trajectory full we strong will SG&A future. near-term end that coming of believe in returns any high for the such, investment the in year, prove in and business our we of long-term anticipate the drive outlook to

this consolidated $XXX the subsidiary totaling the and operations, second the cash from at that unregulated balance proud quarter XXXX restricted Cash Turning level. improved entity million. on strong cash, ended the has I second quarter sheet. and the a parent total was already excluding to discontinued unrestricted million $XXX operations basis, flow equivalents sheet. and company's balance $XX with million for We And am investments of the

and impact Taking expect that to positive. activities during operations, unregulated year operating our flow We this account, from and to XXXX expect from liquidity full will million excluding continue into the our the XXXX, be $XXX cosmic $XXX million. year-end cash to we this -- between continue be

strong conviction to of of have to sell Andrew continue we the business. next be earlier, this phase from Lastly, and to mentioned in able that operate position allows and a as from we growth expect our us to strength

Additionally, with program repurchase we quarter connection remain first earnings. share the to our committed we till the announced

Directors next X As the a company $XX back company's reminder, our A common authorized up to Class over Board the of to million buy years. the stock of

Starting capital repurchasing returning in during million of to began May this our year, approximately we shareholders, $X the quarter. stock

nimble maximize for to allocation value and We prudently shareholders. our strategy expect to capital to be continue our manage

Finally, update and an year. full fundamentals of I of half guidance the continued strong business provide first our will in year to improved light through momentum XXXX the our

billion We the insurance our between revenue increasing are to be $X.XXX line for business now $X.XXX guidance of and billion.

insurance to for be are range introducing XX% to of a within year We XX%. full BER also guidance

range an metric be expect basis. this we incurred in mid-XX% on the earlier, I As operational mentioned to

within We our outlook million. are adjusted We $XXX we are to XX% to range between XX%. MCR a be to improving SG&A million $XXX of to maintaining our -- and be insurance

our We XXXX be adjusted year EBITDA guidance are increasing to between million $XX full million. and $XX

As performance. just proven We've higher a Andrew is can for this profitability X.X when we year and ] driven achieve results, date deliver we star potential to our returns arc with ratings. touched insurance star significant by strong opportunity rating [ better with even a the plan that if upon,

pipeline. garner with Going MA our continues external reception can beyond plans, about performance grow this market offerings. as the solution excited in future what we robust particularly add our to Counterpart to our Health I'm strong counterparts

our this strengthen execute to ability expect only corporate company's strong and momentums. already the to improve We

Clover believe business this we have couple our we've is last In maintain exactly summary, in at developed performance. and is years to momentum goal to our the that the what of improve in goals our during I achieve positioning profitability improved the underlying to of profitability XXXX capacity. EBITDA and long-term done our economics increase to us the first 'XX our well adjusted year, half continue in core

Andrew turn comments. for call the to back me let Now some closing

to In Thanks, year, strong such during our very their the delivering efforts results. with financial of I'm the Clover in performance entire thank Peter. like first would pleased conclusion, half for the team continued I

we're let my net and the industry-leading business growth reiterate perspective. EBITDA adjusted the year head counterpart Medicare already balance are healthy is positive we and own growth from outlook; the takeaways loss ratios; positioned have self-fund in the our in that we we Before Q&A, as driving double-digit via top XXXX for our centric to sheet future three, public for key improved company quarter in One, and our our two, MA we third-party strong first performance fundamentals to improved believe our of ability income well membership strong and Advantage approach full a PPO me revenue time delivered growth; our with line long-term interest plan four, five, offerings.

or thrive that don't. fragmented demonstrate we're value-based anchor We rely systems results on contracts. health in others well and Today's able where markets, we don't perform to

are plan. these us dynamics, a sustain approach benefit-rich PPO profitably to wide plans, MA allows challenging technology-centric network most For but our

and X.X ratings. meaningful capitation. a profitability rely well when for entire see of others results of risk for as heavily generating for us MA EBITDA adjusted unlike opposed the other our care cost book almost rating, on we star to We're And better ourselves who total we delegation every achieve plan, positioning and if even business accountable higher at

be continue goals. updates the Our Clover for everyone. a again, providing execute as against Health to strong to offerings, I year With insurance let's time make Once to fundamentals, that, part coupled go thank forward very an journey. later to our with the look you our we in questions. much exciting counterpart more and to of

to first Canaccord go We'll this Genuity. of afternoon [Operator Richard Close Instructions].

a I guess, about the like in levels, was bit steady about just just it. Is wondering anything drove second on looks that, I if state we'll much that half? curious there's from Peter, pretty at Salary I the if should And a And think we about how there. comment you think it there leave specific execution. Congratulations was Yes. the it perspective. could quarter we it second little modeling million sequentially. $X as decreased benefits and that?

Richard, question. glad Thanks the for here. to be

So well. as of optimize we would we course, continue say, SG&A, as overall, I to scale

quarterization kind some otherwise. and in the fourth your seasonality of quality for course, model the we as at purposes, there's you look own both If make of quarter investments,

specific nothing But to second why went the that much quarter, down sequentially? so

optimization continued . It's

the and out Okay. Andrew, guess, on I I was the guess, Care journal business, curious and are maybe just could articles different Home visits there in guess, than, as there's us articles. maybe what about you in my the it's visits home the referenced doing if follow-up of how for question, validity several, Home been questioning Care you're business that journal Clover, the through I walk the home that. I

transitioning note new question, But says, Yes. on infrastructure I our for some how through moving flow talked this just previous that for your Peter discussed with think to Peter I effect that quarters. we Richard. joining partners. about point. that year we just were just that, new doing. to Prior spoken as and want I on we're how And a to SG&A, you're nothing as to there's ago seeing a several have as at well, some year-over-year some about comparisons we're operations And operating partnerships we of

I but remind that plans from want starting year. that, that's us last discussed just middle of executing the So nothing new, we our to everybody upon

for within believe dimensions are want there's and Number looking home. we the in things on a practitioners, have how think after also and sickest we taking we home actually we are system, Regarding of emphasize. have lot the we our differently, couple over have is Care practice. members DOs, for best do folks we our complicated place the have one, Home and nurse different setting why that focused I that. a but care here in home of MDs, care the the within -- we primary very the to do Care and I Home the we -- And most That's that

a -- sickest lot. see and is we looked there the a focus, from primary what So discuss that's at and as being I that perspective, care our

the a diseases, nurses properly nursing at system. most that are referring but primary sure making being managed they're We times, of then that and some importantly, do looking chronic lot also care visits, into those

they that And different think take we and focusing that's attention, care what So on if sicker, getting different care see on. I think a very is basically that someone primary others relationship. more over we than need strategy home close very you

think dimension brings that technology these platform we care, sure that Clover nursing between back Assistant moving about and that another data I together should team forth between areas. various and and Assistant here talk to care the is the make is our primary visits,

And looked but when Care way a a member you data, team, in so in our ecosystem the information being we share also Clover of members after get using our visit interoperability CA within Assistant. a and available of their that's any to and are Home from longitudinal home, that user

that things aspects both very our program think those I differentiate are So key from others.

people As something program monitor Score program that others. closely very final Promoter an terms a whether would and proud in to we that's Care extremely Home high we has are very note, recommend the of our Net

We Cassorla to go at next now Citi. Jason

And sounds reserve the like wanted adjustment check Great. in excluding thinking should Is year? was on to in MRA that the the be XXXX. about baseline mid-XXs next you quarter. be Peter, jump that on or It would off us the the double favorable I for right normalized sense true-up we what can development. this range, BER give a

trends suggest bit step-up in steep half guidance the of then in And a cost of back in a of 'XX. would kind

outside kind normal anything and there just your what broadly posturing that is seeing maybe wise you're conservative July or of seasonality would you're for trend maybe be just seeing Just of cost helpful.

Thank you for question. the

of X about try to we'll and in to think I there's there, so them. all

of I the as to far basis remarks, in claims. an either. in month see As we as nicely don't adjustment volume is that, far processing the I far will disclosed in pay the as picking do mid-XXs on think incurred of July, of on percentage., July. And like think the as this more and previously far think prepared the we call expect IBNR be As developments the and as we month I don't The we around year, BER, in up have

Okay.

to -- So for one. be just other for clear

is there incurred the off? Are nuances? mid-XXs jump other the Just . right

Yes.

BER in specific for be basis for on given haven't guidance mid-XXs if will, 'XX, but you percentage. We fiscal yet current expect 'XX, year payment the a we to

a that we we want If yes, 'XX, off into haven't think commented 'XX you it's I on [indiscernible] to point course, year, jump but be yet. of clear necessarily

Sure.

course. Of

us $XXX in that the result as sounds the year-end. unregulated you're had to better And MCR can than you million hoping well. cash make of to walk EBITDA incremental -- then maybe for it. hear just I too. sure, want could looking for upside Obviously, $XXX to bridge context, heard cash 'XX? I did purposes. for then to my as Got perhaps I through my still sounds follow-up. year-to-date this I like just on us just reinvestment business was expectation I as Okay. right, And you you're that for want million bridge sure It maybe spend you away like expected. a kind It make correctly? that keeping

X you Yes. those for questions. Thank

the so for to cash have $XXX So year, repayment, of unregulated around So cash. cash start million $XX as can and million unregulated to you that have maybe around REACH you right? we the we the as deposit prepared the of end $XXX remarks, of million, an first, of with ACO forward will, of I as if walk the

you will, if good we a little the half conservative the but So on overall. second in being bit feel outlook,

gets will. if you range, you that that to So

as and for As investments the long-term in profitability business far growth.

and in capability of over So to the produce of we're model increase capacity the course, the time, profitability. increasing

investments you as about quality system so think investments, And should well right?

later to I over this as specifically will And say of course, shy go sales strategies market But year. discussing also we our time. sales investments of

to Partners. Mayo [Operator at Instructions]. Whit now We'll next Leerink go

want the disclose understand wanted an to which payment have you payment, I the it. in favorability second don't driving maybe a there in that MRA did but year. that And just happens I confirmed higher-than-average this what's quarter. to It seems know like you you was payment, MRA

don't necessarily. disclose think I we that Yes.

midnight There's just and been a lot Maybe seeing of that Okay. noticeable just chatter detect you're rule any X movement if second curious industry question. the you on this. can there

We've on vendor we've like the following a X We've obviously, always this. been guidance little the Yes. following been CMS midnight rule, following been for while.

we've a And little others. so I think been less perturbed by this as

we so things us. proceeding basically for And impact are as real net foresee no

quick as point one Just well.

think about as at these introduced and a as having I all we you various ER MCR few the that asking before the we here. of look and here, we number used the -- are numbers

think incurred sharing number are carrying I TPD. number mid-XXs into would the incurred I not that note we the the that idea would is be obviously that be and that any forth

the And so the than that's in slightly different be why number that guidance. number will

other one thing. follow on I up . can Andrew,

. Sure.

by elaborate claims not July, follow bit you a on sure Just thing, Is I is thing? good that more talk you're I'm just this mean . more Maybe what when what a about little saying. processing. exactly exactly you bad --

answer Yes, one. I can that

of that unpaid elevated levels we in see claims, new switchover at good right? remarks the quarter, both last you quarter, as unpaid new is partner, then saw we So claims. really the changed regard processing in that a volume to July provider our but those if have care prepared health incident, for this progress a of will, you the IBNR in also plus So to because comp the

]. So this further through we balance next quarter [ that expect reduce quarter to and

Okay.

through that on wasn't a a back. on was So It comment utilization. the working comment

Yes.

Instructions]. [Operator

Thanks for the questions. All folks. right, all

managed we the are cost aiming physician as of care better this we look to reiterate, outcomes, lead believe only . to of clinical we for that you deliver this aspect and market choice. the continuing Really, that's the the Thanks, call forward well in and Clover's believe achievements care we in year. platform. technology-powered half again Medicare to better just is Advantage, via future today, technology So joining company sharing our powered that and look more to as I on all unique the in everyone. tailwinds forward second to of Thank our care

Toy. Clover XXXX Webcast. Mr. today's you, This Thank Call Earnings Second concludes Health and Quarter

You Goodbye. time, may line wonderful and this a at have your disconnect day.