Clover Health Investments, Corp. (NASDAQ: CLOV) ("Clover," "Clover
Health" or the "Company"), a physician enablement company committed
to bringing access to great healthcare to everyone on Medicare,
today reported financial results for the third quarter 2023.
Management will host a conference call today at 5:00 p.m. ET to
discuss its operating results and other business highlights.
For the third quarter 2023, the Company reported
revenue of $482.1 million and net loss of $41.5 million. Adjusted
EBITDA in the third quarter 2023 significantly improved to a loss
of $5.1 million compared to the prior year period loss of $55.5
million. Compared to the third quarter 2022, Insurance revenue grew
by 12% to $301.2 million, and MCR improved to 78.5% from 86.3%.
Non-Insurance revenue declined by 70% to $176.0 million compared to
the third quarter 2022, as a result of our previously disclosed
strategic shift, and Non-Insurance MCR was 104.1%.
“We are proud to report another quarter of
significantly improved Adjusted EBITDA driven by strong Insurance
MCR performance,” said Clover Health CEO Andrew Toy. “Our third
quarter results further highlight in particular the compelling
value contribution from Clover Assistant in addition to meaningful
contributions from operational enhancements, plan design and being
paid on 3.5 stars. I am pleased that our Insurance segment
continues to deliver strong results via our PPO-first approach. We
believe this progress validates our ability to bend the cost curve
by empowering clinicians with software to identify and manage
chronic diseases earlier.”
“Our third quarter results reflect continued
momentum towards sustainable profitability,” said Clover Health CFO
Scott Leffler. “In addition to our favorable third quarter and
year-to-date performance, we expect to enjoy meaningful tailwinds
next year due to efficiencies generated from our previously
announced partnership with UST HealthProof, our balanced approach
to growth, and the continued maturation of Clover Assistant.
Combined, these developments give us increasing optimism in our
ability to deliver profitability on an Adjusted EBITDA basis for
full year 2024.”
Key Company highlights are as follows:
Dollars in Millions |
|
Q3'23 |
|
Q3'22 |
Insurance revenue |
|
$ |
301.2 |
|
|
$ |
267.9 |
|
Non-Insurance revenue |
|
|
176.0 |
|
|
|
585.3 |
|
Total revenue |
|
|
482.1 |
|
|
|
856.8 |
|
Insurance MCR |
|
|
78.5 |
% |
|
|
86.3 |
% |
Non-Insurance MCR |
|
|
104.1 |
|
|
|
104.2 |
|
Salaries and benefits plus
General and administrative expenses ("SG&A")(1) |
|
$ |
102.3 |
|
|
$ |
118.0 |
|
Adjusted Salaries and benefits
plus General and administrative expenses ("Adjusted SG&A")
(non-GAAP)(1)(2)(3) |
|
|
68.2 |
|
|
|
72.6 |
|
Net loss |
|
|
(41.5 |
) |
|
|
(75.5 |
) |
Adjusted EBITDA
(non-GAAP)(2)(3) |
|
|
(5.1 |
) |
|
|
(55.5 |
) |
(1) Salaries and benefits plus General and
administrative expenses ("SG&A") is the sum of Salaries and
benefits plus General and administrative expenses presented as the
GAAP measure in the consolidated financial statements.(2) Adjusted
SG&A (non-GAAP) and Adjusted EBITDA (non-GAAP) are non-GAAP
financial measures. Reconciliations of Adjusted SG&A (non-GAAP)
to SG&A and Adjusted EBITDA (non-GAAP) to Net loss,
respectively, the most directly comparable GAAP measures, are
provided in the tables immediately following the consolidated
financial statements below. Additional information about the
Company's non-GAAP financial measures can be found under the
caption "About Non-GAAP Financial Measures" below and in Appendix
A.(3) Beginning in the first quarter 2023, we updated our
definition and presentation of Adjusted EBITDA (non-GAAP) and
Adjusted SG&A (non-GAAP) to exclude restructuring costs and
non-recurring legal expenses and settlements. Beginning in the
second quarter 2023 restructuring costs will be presented
separately in the consolidated statement of operations.
Restructuring costs and non-recurring legal expenses and
settlements are now being excluded because management believes that
restructuring costs and non-recurring legal expenses and
settlements do not reflect the Company's underlying fundamentals
and operating expenses relating to its core businesses or its
actual recurring cash expense. The prior period figure has been
revised to conform to the updated definition and presentation. For
additional information, see the definitions of "Adjusted EBITDA
(non-GAAP)" and “Adjusted SG&A (non-GAAP)” in Appendix A.
Financial Outlook
For full-year 2023, Clover Health is updating
its guidance as follows:
|
Current Guidance |
|
Previous Guidance |
Insurance Revenue |
$1.21 billion - $1.23 billion |
|
$1.20 billion - $1.23 billion |
Non-Insurance Revenue |
$0.75 billion - $0.80 billion |
|
$0.75 billion - $0.80 billion |
Insurance MCR |
81% - 82% |
|
83% - 85% |
Non-Insurance MCR |
98% - 100% |
|
98% - 100% |
Adjusted SG&A
(Non-GAAP)(1) |
$310 million - $315 million |
|
$315 million - $325 million |
Adjusted EBITDA
(Non-GAAP)(1) |
($55) million - ($80) million |
|
($70) million - ($120) million |
(1) Reconciliations of projected Adjusted
SG&A (non-GAAP) to projected SG&A, and projected Adjusted
EBITDA (non-GAAP) to Net loss, the most directly comparable GAAP
measures, are not provided because Stock-based compensation
expense, which is excluded from Adjusted SG&A (non-GAAP) and
Adjusted EBITDA (non-GAAP), cannot be reasonably calculated or
predicted at this time without unreasonable efforts. Additional
information about the Company's non-GAAP financial measures can be
found under the caption "About Non-GAAP Financial Measures" below
and in Appendix A.
Lives under Clover
Management
|
September 30, 2023 |
|
September 30, 2022 |
Insurance members |
81,275 |
|
88,136 |
Non-Insurance
beneficiaries |
51,528 |
|
166,432 |
Earnings Conference Call Details
Clover Health's management will host a
conference call to discuss its financial results on Monday,
November 6, at 5:00 PM Eastern Time. A live webcast of the call,
together with the related materials, can be accessed from Clover
Health's Investor Relations website at investors.cloverhealth.com,
and an on-demand replay will be available on the same website
following the call.
Upcoming Investor Events & Conferences
- Canaccord Genuity 2023 Medical
Technology & Diagnostics Forum, November 16, 2023
Any live and archived webcasts and presentations
associated with the conferences listed above may be accessed on
Clover Health's Investor Relations website at:
investors.cloverhealth.com/news-and-events/investor-events-presentations
Forward-Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Forward-looking statements include statements
regarding future events and Clover Health's future results of
operations, financial condition, market size and opportunity,
business strategy and plans, and the factors affecting our
performance and our objectives for future operations.
Forward-looking statements are not guarantees of future performance
and you are cautioned not to place undue reliance on such
statements. In some cases, you can identify forward looking
statements because they contain words such as "may," "will,"
"should," "expects," "plans," "anticipates," "going to," "can,"
"could," "should," "would," "intends," "target," "projects,"
"contemplates," "believes," "estimates," "predicts," "potential,"
"outlook," "forecast," "guidance," "objective," "plan," "seek,"
"grow," "if," "continue" or the negative of these words or other
similar terms or expressions that concern Clover Health's
expectations, strategy, priorities, plans or intentions.
Forward-looking statements in this press release include, but are
not limited to, the following: statements under "Financial Outlook"
and statements regarding expectations relating to potential
improvements in Insurance MCR, Non-Insurance MCR, operating
expenses, and the number of Clover Health's Insurance members, as
well as the statements contained in the quotations of our executive
officers, including expectations related to Clover Health's
"strides towards sustainable profitability," future capital needs
and other expectations as to future performance, operations and
results (including our updated guidance for 2023). These statements
are subject to known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity,
performance or achievements to differ materially from results
expressed or implied by forward-looking statements in this press
release. Forward-looking statements involve a number of judgments,
risks and uncertainties, including, without limitation, risks
related to: our expectations regarding results of operations,
financial condition, and cash flows; our expectations regarding the
development and management of our Insurance and Non-Insurance
businesses; our ability to successfully enter new service markets
and manage our operations; anticipated trends and challenges in our
business and in the markets in which we operate; our ability to
effectively manage our beneficiary base and provider network; our
ability to maintain and increase adoption and use of Clover
Assistant; the anticipated benefits associated with the use of
Clover Assistant, including our ability to utilize the platform to
manage our medical care ratios; our ability to maintain or improve
our Star Ratings or otherwise continue to improve the financial
performance of our business; our ability to develop new features
and functionality that meet market needs and achieve market
acceptance; our ability to retain and hire necessary employees and
staff our operations appropriately; the timing and amount of
certain investments in growth; the outcome of any known and unknown
litigation and regulatory proceedings; any current, pending, or
future legislation, regulations or policies that could have a
negative effect on our revenue and businesses, including rules,
regulations, and policies relating to healthcare and Medicare;
fluctuations in the price of our Class A common stock and our
continued compliance with Nasdaq's listing requirements; our
ability to maintain, protect, and enhance our intellectual
property; general economic conditions and uncertainty, including
the societal and economic impact of the COVID-19 pandemic and its
variants; persistent high inflation and interest rates; and
geopolitical uncertainty and instability. Additional information
concerning these and other risk factors is contained under Item 1A.
“Risk Factors” in our most recent Annual Report on Form 10-K filed
with the Securities and Exchange Commission (the "SEC") on March 1,
2023, as such risks may be updated or amended in our subsequent
filings with the SEC. The forward-looking statements included in
this press release are made as of the date hereof. Except as
required by law, Clover Health undertakes no obligation to update
any of these forward-looking statements after the date of this
press release or to conform these statements to actual results or
revised expectations.
About Non-GAAP Financial Measures
We use non-GAAP measures including Adjusted
EBITDA, Adjusted SG&A, and Adjusted SG&A as a percentage of
revenue. These non-GAAP financial measures are provided to enhance
the reader's understanding of Clover Health's past financial
performance and our prospects for the future. Clover Health's
management team uses these non-GAAP financial measures in assessing
Clover Health's performance, as well as in planning and forecasting
future periods. These non-GAAP financial measures are not computed
according to GAAP, and the methods we use to compute them may
differ from the methods used by other companies. Non-GAAP financial
measures are supplemental to and should not be considered a
substitute for financial information presented in accordance with
GAAP and should be read only in conjunction with our consolidated
financial statements prepared in accordance with GAAP. Readers are
encouraged to review the reconciliations of these non-GAAP
financial measures to the comparable GAAP measures, which are
attached to this release, together with other important financial
information, including our filings with the SEC, on the Investor
Relations page of our website at investors.cloverhealth.com.
For a description of these non-GAAP financial
measures, including the reasons management uses each measure,
please see Appendix A: "Explanation of Non-GAAP Financial Measures
and Other Items."
The statements contained in this document are
solely those of the authors and do not necessarily reflect the
views or policies of CMS. The authors assume responsibility for the
accuracy and completeness of the information contained in this
document.
About Clover Health:
Clover Health (Nasdaq: CLOV) is a physician
enablement company committed to bringing access to great healthcare
to everyone on Medicare. This includes a health equity-based focus
on seniors who have historically lacked access to affordable,
high-quality healthcare. Our strategy is powered by our software
platform, Clover Assistant, which is designed to aggregate patient
data from across the healthcare ecosystem to support clinical
decision-making and improve health outcomes through the early
identification and management of chronic disease. We operate two
distinct lines of business: Insurance and Non-Insurance. Through
our Insurance line of business, we provide PPO and HMO Medicare
Advantage plans in several states, with a differentiated focus on
our flagship wide-network, high-choice PPO plans. Our Non-Insurance
line of business similarly aims to reduce cost-of-care while
enhancing the quality of care for patients enrolled in Original
Medicare.
Visit: www.cloverhealth.com
Investor Relations Contact:
Ryan Schmidt
investors@cloverhealth.com
Press Contact:
Andrew Still-Baxter
press@cloverhealth.com
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIESCONSOLIDATED
BALANCE SHEETS: SELECTED METRICS(in thousands) |
|
|
|
|
|
September 30, 2023 |
|
December 31, 2022 |
Selected Balance Sheet
Data: |
|
|
|
Cash, cash equivalents, restricted cash(1), and investments |
$ |
672,043 |
|
$ |
555,293 |
Total assets |
|
1,059,797 |
|
|
808,620 |
Unpaid claims |
|
114,415 |
|
|
141,947 |
Total liabilities |
|
737,945 |
|
|
451,733 |
Total stockholders' equity |
|
321,852 |
|
|
356,887 |
(1) Restricted cash relates to $52.7 million and
$82.4 million held in escrow at September 30, 2023 and December 31,
2022, respectively, in compliance with a CMS guarantee arrangement
in our Non-Insurance business. We expect to settle the related
obligation during fiscal year 2023, after which we expect the
associated guarantee arrangement to be released by CMS.
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Dollars in thousands, except share amounts) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
Premiums earned, net (Net of ceded premiums of $106 and $116, for
the three months ended September 30, 2023 and 2022; net of ceded
premiums of $341 and $354 for the nine months ended September 30,
2023 and 2022, respectively) |
$ |
301,230 |
|
|
$ |
267,892 |
|
|
$ |
932,699 |
|
|
$ |
814,566 |
|
Non-Insurance revenue |
|
176,038 |
|
|
|
585,311 |
|
|
|
575,311 |
|
|
|
1,757,579 |
|
Other income |
|
4,798 |
|
|
|
3,614 |
|
|
|
15,459 |
|
|
|
5,751 |
|
Total revenues |
|
482,066 |
|
|
|
856,817 |
|
|
|
1,523,469 |
|
|
|
2,577,896 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Net medical claims incurred |
|
418,959 |
|
|
|
839,799 |
|
|
|
1,328,403 |
|
|
|
2,560,307 |
|
Salaries and benefits |
|
60,567 |
|
|
|
70,142 |
|
|
|
193,211 |
|
|
|
209,724 |
|
General and administrative expenses |
|
41,747 |
|
|
|
47,832 |
|
|
|
141,588 |
|
|
|
152,569 |
|
Premium deficiency reserve benefit |
|
392 |
|
|
|
(27,476 |
) |
|
|
(6,556 |
) |
|
|
(82,428 |
) |
Depreciation and amortization |
|
557 |
|
|
|
616 |
|
|
|
1,835 |
|
|
|
2,028 |
|
Restructuring costs |
|
1,313 |
|
|
|
— |
|
|
|
7,870 |
|
|
|
— |
|
Total operating expenses |
|
523,535 |
|
|
|
930,913 |
|
|
|
1,666,351 |
|
|
|
2,842,200 |
|
Loss from operations |
|
(41,469 |
) |
|
|
(74,096 |
) |
|
|
(142,882 |
) |
|
|
(264,304 |
) |
|
|
|
|
|
|
|
|
Interest expense |
|
— |
|
|
|
404 |
|
|
|
7 |
|
|
|
1,197 |
|
Gain on investment |
|
— |
|
|
|
980 |
|
|
|
— |
|
|
|
(10,187 |
) |
Net loss |
$ |
(41,469 |
) |
|
$ |
(75,489 |
) |
|
$ |
(142,889 |
) |
|
$ |
(255,341 |
) |
Basic and diluted weighted
average number of Class A and Class B common shares and common
share equivalents outstanding |
|
480,770,283 |
|
|
|
477,690,204 |
|
|
|
480,921,520 |
|
|
|
475,609,571 |
|
Operating Segments
|
|
Insurance |
|
Non-Insurance |
|
Corporate/Other |
|
Eliminations |
|
Consolidated Total |
|
|
|
Three Months Ended
September 30, 2023 |
|
(in thousands) |
Premiums earned, net (Net of ceded premiums of $106) |
|
$ |
301,230 |
|
$ |
— |
|
|
$ |
— |
|
$ |
— |
|
|
$ |
301,230 |
Non-Insurance revenue |
|
|
— |
|
|
176,038 |
|
|
|
— |
|
|
— |
|
|
|
176,038 |
Other income |
|
|
3,338 |
|
|
(478 |
) |
|
|
14,696 |
|
|
(12,758 |
) |
|
|
4,798 |
Intersegment revenues |
|
|
— |
|
|
— |
|
|
|
43,335 |
|
|
(43,335 |
) |
|
|
— |
Net medical claims
incurred |
|
|
236,533 |
|
|
183,173 |
|
|
|
4,691 |
|
|
(5,438 |
) |
|
|
418,959 |
Gross profit (loss) |
|
$ |
68,035 |
|
$ |
(7,613 |
) |
|
$ |
53,340 |
|
$ |
(50,655 |
) |
|
$ |
63,107 |
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
ADJUSTED EBITDA (NON-GAAP) RECONCILIATION |
(in thousands)(1) |
|
|
|
|
|
Three Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
Net loss: |
$ |
(41,469 |
) |
|
$ |
(75,489 |
) |
Adjustments |
|
|
|
Interest expense |
|
— |
|
|
|
404 |
|
Amortization of notes and securities discount |
|
— |
|
|
|
9 |
|
Depreciation and amortization |
|
557 |
|
|
|
616 |
|
Gain on investment |
|
— |
|
|
|
980 |
|
Stock-based compensation expense |
|
33,070 |
|
|
|
42,641 |
|
Premium deficiency reserve benefit |
|
392 |
|
|
|
(27,476 |
) |
Restructuring costs |
|
1,313 |
|
|
|
— |
|
Non-recurring legal expenses and settlements |
|
1,007 |
|
|
|
2,775 |
|
Expenses attributable to Seek Insurance Services, Inc. |
|
— |
|
|
|
6 |
|
Adjusted EBITDA (non-GAAP) |
$ |
(5,130 |
) |
|
$ |
(55,534 |
) |
(1) The table above includes non-GAAP measures.
Non-GAAP financial measures are supplemental and should not be
considered a substitute for financial information presented in
accordance with GAAP. For a detailed explanation of these non-GAAP
measures, see Appendix A.
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIESRECONCILIATION OF
NON-GAAP FINANCIAL MEASURESADJUSTED SG&A (NON-GAAP)
RECONCILIATION(in thousands)(1) |
|
Three Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
Salaries and benefits |
$ |
60,567 |
|
|
$ |
70,142 |
|
General and administrative
expenses |
|
41,747 |
|
|
|
47,832 |
|
Total SG&A |
|
102,314 |
|
|
|
117,974 |
|
Adjustments |
|
|
|
Stock-based compensation expense |
|
(33,070 |
) |
|
|
(42,641 |
) |
Non-recurring legal expenses and settlements |
|
(1,007 |
) |
|
|
(2,775 |
) |
Expenses attributable to Seek Insurance Services, Inc. |
|
— |
|
|
|
(6 |
) |
Adjusted SG&A (non-GAAP) |
$ |
68,237 |
|
|
$ |
72,552 |
|
|
|
|
|
Total revenues |
$ |
482,066 |
|
|
$ |
856,817 |
|
Adjusted SG&A (non-GAAP)
as a percentage of revenue |
|
14 |
% |
|
|
8 |
% |
(1) The table above includes non-GAAP measures.
Non-GAAP financial measures are supplemental and should not be
considered a substitute for financial information presented in
accordance with GAAP. For a detailed explanation of these non-GAAP
measures, see Appendix A.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESAppendix AExplanation of Non-GAAP Financial
Measures
Non-GAAP Definitions
Adjusted EBITDA - A non-GAAP financial measure
defined by us as net loss before interest expense, amortization of
notes and securities discount, depreciation and amortization, gain
on investment, stock-based compensation expense, premium deficiency
reserve benefit, restructuring costs, non-recurring legal expenses
and settlements, and expenses attributable to Seek. Adjusted EBITDA
is a key measure used by our management team and the board of
directors to understand and evaluate our operating performance and
trends, to prepare and approve our annual budget and to develop
short and long-term operating plans. In particular, we believe that
the exclusion of the amounts eliminated in calculating Adjusted
EBITDA provide useful measures for period-to-period comparisons of
our business. Accordingly, we believe that Adjusted EBITDA provides
investors and others useful information to understand and evaluate
our operating results in the same manner as our management and our
board of directors.
Adjusted SG&A - A non-GAAP financial measure
defined by us as total SG&A less Stock-based compensation
expense, less non-recurring legal expenses and settlements, less
expenses attributable to Seek Insurance Services, Inc. We believe
that Adjusted SG&A provides management, investors, and others a
useful view of our operating spend as it excludes non-cash,
stock-based compensation and expenses related to investments that
management believes do not reflect the Company's core operating
expenses. We believe that Adjusted SG&A as a percentage of
revenue is useful to management, investors, and others because it
allows us to measure our operational leverage as revenue
scales.
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