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 second 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 second quarter 2023, the Company
reported revenue of $513.6 million and net loss of $28.8 million.
Adjusted EBITDA in the second quarter 2023 improved to a gain of
$10.0 million compared to the second quarter 2022 loss of $83.9
million. Compared to the second quarter 2022, Insurance revenue
grew by 17% to $314.4 million, and MCR improved to 77.2% from
92.1%. As contemplated in the Company's previously disclosed
strategic shift for the Non-Insurance segment, Non-Insurance
revenue declined by 67% to $193.5 million, and MCR improved to
99.6% from 106.0%.
"We’re delighted to have delivered our first
quarterly Adjusted EBITDA profit as a public company,” said Clover
Health CEO Andrew Toy. “We have been strategically focused on
demonstrating the strength of our model by maturing operations,
driving efficiencies, and continuing to invest in Clover Assistant
R&D and our home care capabilities. We have multiple exciting
initiatives in each of these areas that we expect will allow us to
maintain our momentum through the second half of the year and into
2024. We are reflecting that expectation via significantly improved
full year 2023 guidance for the Insurance segment and on a
consolidated basis."
"Insurance MCR improved by more than 1,400 basis
points and Non-Insurance MCR improved by more than 600 basis
points, demonstrating the strength of our strategy and our ability
to make strides towards sustainable profitability,” said Clover
Health CFO Scott Leffler. “We are excited about our improved
outlook for 2023, the favorable impact on our liquidity position,
and are also increasingly confident in the Company’s potential to
deliver profitability on an Adjusted EBITDA basis for full year
2024 without the necessity of raising additional capital."
Key Company highlights are as follows:
Dollars in Millions |
|
Q2'23 |
|
Q2'22 |
Insurance revenue |
|
$ |
314.4 |
|
|
$ |
268.5 |
|
Non-Insurance revenue |
|
|
193.5 |
|
|
|
577.4 |
|
Total revenue |
|
|
513.6 |
|
|
|
846.7 |
|
Insurance MCR |
|
|
77.2 |
% |
|
|
92.1 |
% |
Non-Insurance MCR |
|
|
99.6 |
|
|
|
106.0 |
|
Salaries and benefits plus
General and administrative expenses ("SG&A")(1) |
|
$ |
104.9 |
|
|
$ |
117.5 |
|
Adjusted Salaries and benefits
plus General and administrative expenses ("Adjusted SG&A")
(non-GAAP)(1)(2)(3)(4) |
|
|
66.7 |
|
|
|
71.8 |
|
Net loss |
|
|
(28.8 |
) |
|
|
(104.4 |
) |
Adjusted EBITDA
(non-GAAP)(3)(4) |
|
|
10.0 |
|
|
|
(83.9 |
) |
(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) |
|
Beginning with the third quarter of 2022, we updated the name
of our Adjusted Operating Expenses (non-GAAP) metric to Adjusted
SG&A (non-GAAP). Please refer to footnote 4 for the updates to
Adjusted SG&A (non-GAAP) beginning in the first quarter of
2023. |
(3) |
|
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. |
(4) |
|
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 OutlookFor full-year
2023, Clover Health is providing its guidance as follows:
- Insurance revenue
is expected to be in the range of $1.20 billion to $1.23 billion in
2023, a growth rate of 11% - 13% as compared to full year 2022
Insurance revenue.
- Insurance MCR is
expected to be in the range of 83% - 85% in 2023.
- Non-Insurance
revenue is expected to be in the range of $0.75 billion to $0.80
billion in 2023.
- Non-Insurance MCR
is expected to be in the range of 98% - 100% in 2023.
- Adjusted SG&A
(non-GAAP)(1) is expected to be between $315 million and $325
million.
- Adjusted EBITDA
(non-GAAP)(1) is expected to be between ($70 million) and ($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
|
|
June 30, 2023 |
|
|
|
June 30, 2022 |
|
Insurance members |
|
82,526 |
|
|
|
86,629 |
|
Non-Insurance
beneficiaries |
|
52,393 |
|
|
|
168,777 |
|
Earnings Conference Call Details
Clover Health's management will host a
conference call to discuss its financial results on Tuesday, August
8, 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 43rd Annual
Growth Conference at 8:00 a.m. Eastern Time, August 9, 2023
- Wells Fargo 2023 Healthcare
Conference at 10:15 a.m. Eastern Time, September 6, 2023
- Clover Assistant Showcase
Event
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 release include, but are not
limited to, 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 in this press release. Such risk factors include, but are
not limited to, those related to: Clover Health's ability to
increase the lifetime value of enrollments and manage medical
expenses; changes in CMS' risk adjustment payment system;
challenges in expanding our member and beneficiary base or into new
markets; Clover Health's exposure to unfavorable changes in local
benefit costs, reimbursement rates, competition and economic
conditions; the impact of litigation or investigations; changes or
developments in Medicare or the health insurance system and laws
and regulations governing the health insurance markets; the current
and future impact of the COVID-19 pandemic and its variants on
Clover Health’s business and industry; the adoption and usage of
Clover Assistant; the timing and market acceptance of new releases
and upgrades to Clover Assistant; and the successful development of
our Non-Insurance operations and the degree to which our offerings
gain market acceptance by physicians. Additional information
concerning these and other risk factors is contained in our most
recent Annual Report on Form 10-K filed with the Securities and
Exchange Commission (the "SEC"), including the Risk Factors section
therein, and in our other filings with the SEC. The forward-looking
statements included in this 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 Schmidtinvestors@cloverhealth.com
Press Contact:
Andrew Still-Baxterpress@cloverhealth.com
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIESCONSOLIDATED
BALANCE SHEETS: SELECTED METRICS(in thousands) |
|
|
June 30, 2023 |
|
December 31, 2022 |
Selected Balance Sheet
Data: |
|
|
|
Cash, cash equivalents, restricted cash(1), and investments |
$ |
689,819 |
|
|
$ |
555,293 |
|
Total assets |
|
1,257,997 |
|
|
|
808,620 |
|
Unpaid claims |
|
117,622 |
|
|
|
141,947 |
|
Total liabilities |
|
927,427 |
|
|
|
451,733 |
|
Total stockholders' equity |
|
330,570 |
|
|
|
356,887 |
|
(1) |
|
Restricted
cash relates to $82.7 million and $82.4 million held in escrow at
June 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 SUBSIDIARIESCONSOLIDATED
STATEMENTS OF OPERATIONS(Dollars in thousands, except share
amounts) |
|
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
Premiums earned, net (Net of ceded premiums of $113 and $119, for
the three months ended June 30, 2023 and 2022, respectively) |
$ |
314,383 |
|
|
$ |
268,505 |
|
|
$ |
631,469 |
|
|
$ |
546,674 |
|
Non-Insurance revenue |
|
193,490 |
|
|
|
577,370 |
|
|
|
399,273 |
|
|
|
1,172,268 |
|
Other income |
|
5,755 |
|
|
|
825 |
|
|
|
10,661 |
|
|
|
2,137 |
|
Total revenues |
|
513,628 |
|
|
|
846,700 |
|
|
|
1,041,403 |
|
|
|
1,721,079 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Net medical claims incurred |
|
436,954 |
|
|
|
858,786 |
|
|
|
909,444 |
|
|
|
1,720,508 |
|
Salaries and benefits |
|
62,437 |
|
|
|
70,491 |
|
|
|
132,644 |
|
|
|
139,582 |
|
General and administrative expenses |
|
42,433 |
|
|
|
47,040 |
|
|
|
99,841 |
|
|
|
104,737 |
|
Premium deficiency reserve benefit |
|
(5,138 |
) |
|
|
(27,476 |
) |
|
|
(6,948 |
) |
|
|
(54,952 |
) |
Depreciation and amortization |
|
999 |
|
|
|
586 |
|
|
|
1,278 |
|
|
|
1,412 |
|
Restructuring costs |
|
4,750 |
|
|
|
— |
|
|
|
6,557 |
|
|
|
— |
|
Total operating expenses |
|
542,435 |
|
|
|
949,427 |
|
|
|
1,142,816 |
|
|
|
1,911,287 |
|
Loss from operations |
|
(28,807 |
) |
|
|
(102,727 |
) |
|
|
(101,413 |
) |
|
|
(190,208 |
) |
|
|
|
|
|
|
|
|
Interest expense |
|
7 |
|
|
|
390 |
|
|
|
7 |
|
|
|
793 |
|
Gain on investment |
|
— |
|
|
|
1,227 |
|
|
|
— |
|
|
|
(11,167 |
) |
Net loss |
$ |
(28,814 |
) |
|
$ |
(104,362 |
) |
|
$ |
(101,420 |
) |
|
$ |
(179,852 |
) |
Basic and diluted weighted
average number of Class A and Class B common shares and common
share equivalents outstanding |
|
479,163,752 |
|
|
|
476,061,809 |
|
|
|
479,819,237 |
|
|
|
474,553,609 |
|
Operating Segments |
|
|
Insurance |
|
Non-Insurance |
|
Corporate/Other |
|
Eliminations |
|
Consolidated Total |
Three Months Ended
June 30, 2023 |
(in thousands) |
Premiums earned, net (Net of ceded premiums of $113) |
$ |
314,383 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
314,383 |
|
Non-Insurance revenue |
|
— |
|
|
|
193,490 |
|
|
|
— |
|
|
|
— |
|
|
|
193,490 |
|
Other income |
|
2,015 |
|
|
|
1,316 |
|
|
|
12,459 |
|
|
|
(10,035 |
) |
|
|
5,755 |
|
Intersegment revenues |
|
— |
|
|
|
— |
|
|
|
45,654 |
|
|
|
(45,654 |
) |
|
|
— |
|
Net medical claims
incurred |
|
242,839 |
|
|
|
192,692 |
|
|
|
3,682 |
|
|
|
(2,259 |
) |
|
|
436,954 |
|
Gross profit (loss) |
$ |
73,559 |
|
|
$ |
2,114 |
|
|
$ |
54,431 |
|
|
$ |
(53,430 |
) |
|
$ |
76,674 |
|
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIESRECONCILIATION OF
NON-GAAP FINANCIAL MEASURESADJUSTED EBITDA (NON-GAAP)
RECONCILIATION(in thousands)(1) |
|
|
Three Months EndedJune 30, |
|
|
2023 |
|
|
|
2022 |
|
Net loss: |
$ |
(28,814 |
) |
|
$ |
(104,362 |
) |
Adjustments |
|
|
|
Interest expense |
|
7 |
|
|
|
390 |
|
Amortization of notes and securities discount |
|
— |
|
|
|
18 |
|
Depreciation and amortization |
|
999 |
|
|
|
586 |
|
Gain on investment |
|
— |
|
|
|
1,227 |
|
Stock-based compensation expense |
|
36,108 |
|
|
|
41,927 |
|
Premium deficiency reserve benefit |
|
(5,138 |
) |
|
|
(27,476 |
) |
Restructuring costs |
|
4,750 |
|
|
|
— |
|
Non-recurring legal expenses and settlements |
|
2,108 |
|
|
|
3,591 |
|
Expenses attributable to Seek Insurance Services, Inc. |
|
— |
|
|
|
224 |
|
Adjusted EBITDA (non-GAAP) |
$ |
10,020 |
|
|
$ |
(83,875 |
) |
(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 June 30, |
|
|
2023 |
|
|
|
2022 |
|
Salaries and benefits |
$ |
62,437 |
|
|
$ |
70,491 |
|
General and administrative
expenses |
|
42,433 |
|
|
|
47,040 |
|
Total SG&A |
|
104,870 |
|
|
|
117,531 |
|
Adjustments |
|
|
|
Stock-based compensation expense |
|
(36,108 |
) |
|
|
(41,927 |
) |
Non-recurring legal expenses and settlements |
|
(2,108 |
) |
|
|
(3,591 |
) |
Expenses attributable to Seek Insurance Services, Inc. |
|
— |
|
|
|
(224 |
) |
Adjusted SG&A (non-GAAP) |
$ |
66,654 |
|
|
$ |
71,789 |
|
|
|
|
|
Total revenues |
$ |
513,628 |
|
|
$ |
846,700 |
|
Adjusted SG&A (non-GAAP)
as a percentage of revenue |
|
13 |
% |
|
|
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.
Beginning with the third quarter of 2022, we updated the name of
our Adjusted Operating Expenses (Non-GAAP) metric to Adjusted
SG&A (Non-GAAP).
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