CLOV - Earnings call transcript Q2 2021 | Clover Health Investments, Corp.

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Operator

Good day and thank you for standing by. Welcome to the Clover Health’s Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] It is my pleasure to hand the conference over to Derrick Nueman, Vice President of Investor Relations. ahead. go Please

Derrick Nueman

everyone. Good morning,

on our today’s CFO, CEO, me is Wagner. call and CTO, Garipalli; President our Vivek Andrew Joining our Toy; Joe and

We and recent call quarter also will questions. is your This trends recorded. being discuss second answer results,

risks Form I including you we materials, I’d to in June today’s ended and year about on XXXX. remind report quarter and reports release, also December at that clovehealth.com. SEC are make actual a the available during like that filings our including call of may materially now subject the ended like measures you materials available for to including of section Before Factors including our non-GAAP in to earnings Form website. that, our XX-K With would measures statements cause quarter uncertainties. these forward-looking you caution our XX, results XXXX from over the our measures, will we that are the may that on the filings, quarterly I to can started, second periodic be website expectations our other Information Vivek. financial call to for get the in earnings in XX, XX-Q differ on referenced, to reconciliation turn also on Factors found GAAP annual are our Risk detailed SEC

Vivek Garipalli

today. and Derrick Thanks, everyone us joining for thanks

across times healthcare before, economic underserved trajectory, of said a have seniors, many growth America’s incentives improving on system. and I As for aggressive aligning broken standing, goals, equity have we ambitious delivering health our regardless

this quarter, Medicare seniors. serving entire important key from to total the both because points into an are making up including million We progress are we note, toward We and $XXX delivered Medicare the on think Advantage market, after goals year-over-year. both XXX% Getting trillion fee-for-service. we going revenue, $X in is ICL plus and basis more those the

nearly our doubled launch last continues quarter. his will management and growth by grow Clover under was business differentiator, be to to steadily. Andrew Assistant versus which MA to This lives Our commentary. contracting the address in driven continuing direct a XXX,XXX of Clover

While do job Medicare-focused on serving more most underserved by companies equity to or health than we minority a better continue beneficiaries.

Clover of over members towards historically a reminder, plans a industry index our an populations over average than and more As minorities MA underserved little of versus are XX% XX%.

a Medicare referenced. these we expect building piece to only and we just We go a continue of trends market strong we we as plus trillion growth $X believe after bigger foundation are the

recently we subject XXX preparing and MA expanding are for are our approval fall another plans Specifically, enrollment announced to counties to annual XXXX, the Period. we in CMS

as into adding more us DCE states bring to We provide more Assistant MA many and importantly more The and network aggressively plan in announcing by faster the with our the release Florida. DCE are press moving also future the recent physicians. DCE’s help build evidenced also us providers adequacy expansion as to Clover they will efforts ability new into our the expand

to our it our in create continues business, structural makes COVID-XX near-term have we While tailwinds challenges holistically these and difficult long-term to progress. evaluate

Clover’s Specifically, in their especially New pausing expenses market, scores Jersey. via it revenue as largest to here It’s and has economics. impacted our risk discuss worth as medical mission well

most life most every notably, Our challenging brought markets, core Jersey. to COVID improve New and the to is mission has our conditions some of

members if a visit. just support. CMS would is we Assistant pure on to vaccinations more we management and have during helped proud are as protocols, mechanism maintain focused care, have face-to-face any care via paid even or voice by not the communication Clover this for are done so. We to even proud latter relax members our in We the recognized utilization time, Video our have that

this had an wear and as of adjustment of While risk medical effect honor. course a expenses badge we on that our revenues, has

as where we the COVID-XX score manifested that by GAAP to impacted XXXX, we changes exercise performance to continue QX of through of is help itself XX% looking and direct MCR and and low takeaway GAAP this will from noise, through in evaluate is with impacts. proud of providing QX XXXX plant who This this costs, disclosure That Clover are been get with XXX%. shifts in investors a utilization. In as and MCR do record includes this risk heavily better this we The it. key COVID. the We record additional Clover’s around COVID-XX said, pandemic are we has MCR, a a high are had at these company

expansion of view what and methodology, new star Global upside Uber was our lead most we helping will companies quarter, normalized And strategic from member last reflect of He the Applying tech MCR, the and a technology of including that such be like to area instrumental WeWork Justin Assistant from at continue improvements MCR which XX.X% help experience year, Development hires updated long-term of Officer especially as in are propel results healthcare coverage, disruptive Prabh recently non-GAAP key improvements view Singh, believes fundamentals our was COVID-XX are such service and on efforts. Officer. from team we robust Strategy Clover growth recent brings this pursuing updated with predict in internal believe recently and It’s wealth normalized it drive benefit XX.X%. from ratings our outside gone, Business providing the a Clover when meaningful to we brings this two looks growth. new and business year, QX will healthcare, to our a normalized be for are Justin and environment. and basis. impact as our & hard Development experience will and provide bridge driving potential underway. significant Chief potential variants. to Palantir. our our hypothetical Prabhdeep partnerships. We improved strengthen to additional Growth We made we But processes and org, better management the to Chief underlying company’s Joseph, COVID COVID management, an welcomed these Shifting driving less our company’s more measures UI This

Wagner on. We him CFO, family his years as also and for Chief team Herbers been our true Joe Mark journey Joe has and transition. since has be the smooth He a wish be a finance number private with for and in Financial announced experience search very partner as CFO. of Mark over working that it moving a has and best. interim we closely entire a served am Officer we announcement will our Joe conduct confident will permanent serve sector. on our and healthcare while CFO has and public XX of this I a organizations will been the

We are in an exciting phase growth. of

look better goal We underserved. proof seniors, healthcare progresses. that Andrew? We our on are passionate this make those can especially to and providing for we are forward delivering that points as journey

Andrew Toy

and Thanks, indicators unique a similarly we contracting. about around quarter, the are especially this to our Assistant reporting to I success growth Vivek. am are model. think scale I what point of have few in excited direct Clover comments I

of other the models, Medicare we believe Advantage of By via success see per This unlike primary data-driven Assistant. our is Assistant quarter fee-for-service population demonstrated combined direct of via aim to last do we to to via potential access market to manage access driving maximum market. track we doing our Assistant differentiator key this, reminder, choice contracting. larger, building with that over cases, very and growth evidenced servicing differentiated the why so management flexibility and a the our and represents Clover that And I XXX% sessions eligibles addressable average believe full most which a this am remained around us as to the even with important the Medicare ability we evidence currently fact results, Assistant to these under but and around of $X participate rate Clove launch a contrast the Medicare it to Clover $X only healthcare market, a few as financial our outcome continue better powered ability informed other is strong from excited healthcare XX,XXX an puts trillion lives CA. of both have grown we’ve members. In we we the Clover tasks not gives XX,XXX, engagement in the by the then believe billion session. physicians data to can over on Assistant programs, Assistant to wish physicians Clover in to see CA growth enables This of is our engineering over scaling both annualized of personalized development. And vision they our deliver physicians, year-over-year. We use We and through the that the a get in at by has in the loop XX%. month, That has direct open approaches, fee-for-service market to care is Clover can X the via contracting. with better As significantly to believe companies same programs, our feedback Clover for to transform growth mode network direct Clover This total that wide revenue Assistant. Medicare that lower and costs both and both

we lower with continued to of enabled a on physicians enhance who continue is not, that versus the We the Returning MCRs making than first example, as EHR of treat did medical XXXX, are to level in in features To to capabilities help our Clover provider, integration. thrilled we engagement to as via we diagnose saw this our providers terms data CA conditions. by of XX.X% XX%. more in see a who those ratio area, that members and care for difference this have Assistant half normalized with real better build point,

CA returning fee-for-service critical grew is have which consider significant, basis of basis reported points. differential. number be our point more an the XXXX to to un-normalized because Additionally, network. Ultimately, to this member ability Medicare differential, assess most this a on MCR incurred PPO is the the compared reminder, this this we is wide statistic is to normalized differential or a On X,XXX over basis, even MCR we historically basis. appropriate manage approximately A XXX the

has Assistant and Clover As the aim delivered you our will consistently cadence launch going see, feature forward. strong accelerate we to can impact

capabilities for interoperability standards we we EHR that example, in recently announced support a fire our of For expect to new CA area streamline in the and integration.

We manage chronic always diabetes, to conditions to member to the that chronic new around launch be or populations, whether clinical looking are other. our oncology, are that endemic disease help capabilities also kidney

it hand the financial to Joe we platform efficacy increase. the reach engagement, launch, that, expect will features only and of Assistant to these now the With for As update. I Clover

Joe Wagner

Thanks, Andrew.

We in contracting XXX% driven MA to revenue delivered in the of have $XXX quarter, and are second by million our growth membership. the growth was in thrilled This direct up year-over-year. launch

we now quarter As XXXX. lives contracting of MA roughly have as approximately of membership quarter of comprised XX, and respectively under XXX,XXX second direct end, is XXXX. of This XX,XXX the XX,XXX June Clover lives and of double management,

MCR, inclusion to the $XXX to contracting. Moving claims our for year-over-year quarter million, incurred were the due medical of up direct net primarily

non-GAAP less in from As points. costs was our we MCR Vivek COVID York, GAAP And COVID-XX and direct were New to utilization XXX New quarter We outside. to development diagnosed we amplified XX%. GAAP QX, XXX and was diagnosed Excess weren’t MCRs estimate pandemic. increased approximately equates utilization significant COVID-XX basis deferred discussed, for was from saw XXX%. This impact was conditions direct points. to members measures basis as normalization are impact care than mitigate during MCR that caring the the that basis This largest Prior have though XXX a costs points. continues In our Jersey to where been COVID-XX normalized the basis period risk and the points. MA and adjustment chronic impact XXX were incurred markets as with due of it COVID outpatient last that was

finalized be for not occurs. will contracting the year CMS direct reconciliation for until results financial final Our X

expect next the moving direct So, factors medical said parts. plans, same GAAP that remains COVID-XX on incurred of MA that two. highlighting, Two net will factors which we other basis And to With happen. were by claims understand million our lot a or $XXX.X take and we as impacted performance a recruitments extent there optimize. new, and that other to York. could of fully contracting processes or were us, unclear as whether provide of so yet We and as time some may normalized financial program a are that XX% in our timing DCE of New the clinical plan either but lives result don’t improve CMS quarter DCE, Jersey ramping but trend to also benchmarks, to will data the for enough result New is as what benefit retrospectively it’s worth stop-loss of roughly to a do in to initiatives, have DCE adjust

operating $XX.X total the non-GAAP of adjusted of XXXX. million stock-based excludes million our were with line to representing quarter expenses, in Second of $XX.X in non-cash XX% was compared revenues This total second revenues XX% compensation, quarter and which expectations.

last our loss reserve deficiency the a the was negative adjusted by of for year’s contracting, for operational impact negative and and fact of adjustments Our adjusted $XXX.X to the a normalizing which EBITDA normalized EBITDA second quarter we higher MCR business estimated was the have MCR $XX.X MCR our EBITDA $XX.X yet that positive quarter premium million related investments. includes direct for quarter adjusted our COVID, million normalized million. second compared driven loss for the don’t COVID or After

a our includes second additional million loss shares increase Note the are X.X the quarter a the cashless shares. outstanding of in change warrants this liability. XXX.X the This value non-cash quarter. million quarter to of of third warrant approximately the at to equate all would the of had million due in count relating share Clover fair And to our end will redeemed, assuming redemption that warrants. $XXX.X

COVID, expand the impacts we XXXX. $XXX.X volatility, segment. continue optimize expenses cash share of as delivering to around continue to totaled growth market equivalents we and as Despite contracting to investments cash, due our near-term revenue June Our expect and especially million XX, solid and direct

of $XXX $XXX of Medicare to $X.X billion. revenue billion contracting reflects For revenues million. range full million expected and $X.X year are to XXXX million be million the total This to revenue of to MA in $XXX direct $XXX

for contracting in is Advantage to active. is for aligned to X, expect we on expected operating adjusts within flat aligned XXXX. Normalized to full Medicare for We December roughly remain claims of expected are that reaffirming increase beneficiaries range beneficiaries significant by our the XX, membership Further, beneficiaries year total XX,XXX of when non-GAAP Direct We COVID-XX, a which XX,XXX XXXX guidance of be the Advantage, in for non-GAAP to remainder January impacts MCR the the again $XXX which be are compensation expense estimate Medicare range to to become full XX% million range of XX% adjusted excludes expenses, for the the XXXX. expected XXXX remain in of $XXX million. year stock-based will year.

are that XX% as on potential Note don’t EBITDA million. next million MCR significant or mark-to-market Normalized last to of components As does to loss a place the enough fair yet are is of something range to of $XXX not of the the adjusted expected of magnitude. including or I $XXX income, normalized said direct for we again be loss contracting up, negative value half quarter XXXX in reflect earlier. I accounting negative compared the This XXXX. what variability Wrapping revenue, expenses first in discussed warrant quarter. net revenue percentage will net to potential to we the timing due have full in any range providing benchmarks liability plan half several of for XXXX reiterate or these that to have of we the for the be information of not year second the of and XX% the we two to XX% adjustments expected in in guidance that

seeing our innings. are encouraging early in across traction we but only are We business, the

to achieve although initiatives Clover long-term to levers we will look now drive will build I Vivek remarks. profile. for doing We to several and potential, have closing sidelines. over watching our cost from massive underway back for to hand it the growth forward its and it continue Clover improve to the I be I

Vivek Garipalli

our year. life. much operational our believe Despite Thank accomplishing surface. pursuing every proud only we already the demonstrate guiding you, so We initiatives are mission, of achievements, that this we commitment scratching that our of am Joe. the improve Clover for to team are the impact I

We to the will focus progress strategic on to continue come. our questions. quarters demonstrating Operator, forward we in on look our years we are ready delivering and priorities and for to

Operator

Instructions] Thank Jailendra Suisse. Our from is with first question [Operator Credit you. Singh

Unidentified Analyst

Yes, and Carlos afternoon, in good Jailendra for a is [indiscernible] everyone. This quarter. great

to what currently are percent what So for little assumptions was the and building data also first kind are any question you flush have around I is just you you utilization the second I risks could of trends, from half your guys a wondering members vaccinated? on for bit your out of here

Vivek Garipalli

Hey, kind thanks Vivek. the Appreciate the it’s for Hi, question. words.

going terms it’s – may presented our on from a difficult impact, a it’s But perspective in are majority members part in other actually utilization, of particularly at in who think XX from of to so New terms the just look of out I a take Jersey, access fully data claims project to to that have hence terms not for be really shows perspective, of complete over always pretty we example, data, and of from half, individuals for data well, have terms in data New over for large vaccinated. we overall perspective gotten when our basis. XX% we second of COVID normalized vaccination where vaccinated. a we overall and Jersey has as From why our un-claims

believe still pressure surveys So, membership that stands, our so that’s outreach and are via we forth. we testing where data but

Unidentified Analyst

just wanted you I it noted I really that? flatter, $XXX,XXX heard to guided you just on curious before, since double question, quickly check other One Thank I just was Okay. think I you. contracting, direct correctly, guys on for think have

Vivek Garipalli

sure guidance, to your was around your make answering the… of just want I’m just question Would rest

Unidentified Analyst

Yes, correct.

Vivek Garipalli

Yes.

lot what the just rules bit in perspective permitted are process the in terms of terms of think a of of permitted program influx, involuntary perspective on alignment, CMS’ so is So and – CMS not itself, still from terms a in wise. I

about much in So signing will come we I model is the learn our the on think lives or contracting up will over claims two. next majority more think our net practices from general, And direct quarter majority focused of we more with vast or new alignment.

terms we signing see January folks guidance General time. see alignment on of meaningful are alignment. that putting is now claims over aside, a voluntary will of practices clarified alignment, a starting up But voluntary some the an as there of year. in next impact opportunity So, do think gets

Unidentified Analyst

In you terms clear. of Thank members, sorry, that you. maybe make

Vivek Garipalli

In terms yes. lives, of

Unidentified Analyst

it if was. lives Yes, was that’s my question flat, what

Vivek Garipalli

Yes.

I the increase year, rest hard what like. for come generally really think to claims it’s But vast majority us the that that’s we can driven project of look of to going I think what for from year-over-year alignment. by the is going is say that to

Unidentified Analyst

Okay, thank you.

Operator

Our next question America. Bank Kevin comes Fischbeck from with of

Kevin Fischbeck

that on Okay, Thanks. just great. follow-up maybe guess point. I to

pushed So just of next it’s going be the increase X necessarily we to rate then, think it’s that guess about it’s lower that you to January alignment. claims per growth has to off I were is se, number alignment, way base, to the year, whatever back bigger that should about about it’s to it a not expecting be right been more be it then like voluntary pickup going

kind base run-rate? that So a as of lower ending be we should using as it’s well the really

Vivek Garipalli

Yes.

conversations and giving status of externally having yet understand data with to of haven’t incremental DCE. with been new shared the we’re we any we’ve that conversations do our not of terms next any yet In We guidance. practices year, now join have any

a the terms more at does that. we it next that. share time aware we in bit But will are projecting of we it appropriate understand, so probably And of information little around make difficult, And year.

Kevin Fischbeck

much guess, in is asking is one higher normal I some higher your confident MLR a case the visibility I trajectory Okay. are expect like of what’s I’ve in companies Should to COVID negative next next here been guess, that this this for long-term trend. well. And guess and then underlying versus when questions well? PPD just for into all back be as I see you MLR is what’s happening coming we the pretty MLR? higher as year year getting purely to how we related

Vivek Garipalli

Yes.

organizations we’ve getting it’s been individuals. to well, So sure definitely make – for definitely unfortunate complete and other because a just we’re all phenomenon a obviously in healthcare, an following phenomenon, perspective and companies as

calculation, And I perspective we our the we So really how it importantly, from look internally. we intellectually about when think think good honest. about believe feel our at it’s MCR we of it’s normalized really business

about think just MCR level, kind we two if high of components. So has

the got side you’ve got MedEx You’ve the and side. revenue

So of last year, you components. couple a had

You had services. of utilization lower a

expenses. drop adjustment an artificial in So then in But specialist not in turn also which primary a medical compression had year, in to drop artificial risk you leads essentially care artificial artificial visits, an visits, meaning normal. this

imputed that normalization of adjustment so into And impute revenue. there an year’s next risk that is will

So year, about also to because if of that next exacerbation by risk point, is kind component a the latter up of your year your conditions, going we’re to question, talking adjustment to this part of of show conditions. of driven there complexity MedEx be that’s could in

to So diabetes diabetes as complications. a base with example, just maybe

why MCR be that’s much MCR we that working, of think year. year, in way terms closer reasonably from next will perspective, of normal what kind the be we’re So calendar to year the next they’ll the for just an is Medicare confident

Joe Wagner

from captured to And services. that, Vivek’s to risk a likely change, with there of piece of the point, there will piece that it’s And claims to was – this – along patients of there is enhanced with, quarter of piece complete to that’s kind morbidity this Joe. say, that using moderated that actuaries as is later kind Yes. our be – I team. there thing the is think score. clearly that’s the pent-up Kevin, of via what the a One then in deferred. And we that is we in we our kind able add third-party in-house to extent kind the of be demand. were is then learned our I’ll addition And over this defeat year analysis going their okay, And then

to So again, the I’m the release really of be where going a to really, you from at the quarter in the it’s time press predict of a that we really to half again, calculation. second continue, this. helping we of spent into Vivek’s in and took feel of can Obviously it’s our lot – will look sorry, we second tough likely And hard or went piece piece MCR kind year. see deferred that But point, going normalized comfortable is ultimately be pieces services. then rescored. to complete is captured which there will those understand there that’s a a what to be it moderated as patients But

Kevin Fischbeck

one should MLR Okay. better another look And year? way or next

Vivek Garipalli

to And we just add interesting Joe. of Yes. our thanks, – business point more is relevant just kind internally. about to that very think And one how

the buried fairly was – in illustrative of we breakout release just the but we of terms first lengthy, time we there we’ve So cohorts. realize given across shared an there counties it’s press in MCR

counties. use there of you’ll about over membership. just in our of XX% counties run-out the those see because that And newer six see again, It’s QX you’ll counties, a with of visit you’ll size under top XX% And MCR of the terms in CA members. you’ll but see claims, rate we fully XX% just MCR visit We normalized is the in So little there rest individuals total XX.X%. the more had and over XXX% see a rate. counties was CA it’s

of understanding evolve and our good some in well. how that’s more get an quarters coming the to in information more we more as as to kind really evolve, folks these share coverage counties But of how will breakouts. give MCRs as we CA so And

Kevin Fischbeck

going guys looking number saying kind Okay. And looks what might about underlying given new that MLR to from about big And went last are? is your anything because terribly would is XX.X% that’s view to of question, down basis of MLR think ask to like counties improvement improvement and this to about old long-term how else it I is. you at adjusted the the you that actually year-over-year my just as are answer of improvement point kind best the and well, XX versus And, to XX%. was but there it this point a targets counties that versus what a kind or answer trend

Vivek Garipalli

Yes.

yes, – think that out. I I call appreciate

think I correlation that been said is or between older, we’ve on the only what adjustment coverage. length would not of an directionally, a would point latter I is in the necessarily totally is time but it’s there accounting So accurate. I make – CA definitely you to newer

way so about it about our QX QX or think coverage the a The in XX% little this standpoint. way we normalized the for how in normalized the And half doing whether to think MCR first it’s XX% or over XX% year. normalized the are markets is from CA

so And the lever. really that’s think I

externally impact And the CA illustrative think you coverage. – as us about coverage. perspective CA of we’ve that’s on for models, is the So an and building your shared lever financial from the biggest is this sort of first point data

Kevin Fischbeck

can point Actually maybe I then CA like types about you coverage geographies? two helpful. just fast stats on of is have then, follow-up That’s expanding in Okay. any those a that do how guess see our so kind what bit to into for of it the better? models build we kind it would be how interesting progression that county little normally maybe is a of –

Vivek Garipalli

Yes.

give sort of is it way, is years I you phrase ability achieve – was precise just today to it of coverage than in this I and ago rapid now, unfortunately, the X think the or most a Assistant answer scale Clover which ago. can’t – year right our sense I’ll more

for of that. I reasons couple think is there a

on. his led platform sized was pretty original Clover move meaningful one So team DCE and which have Andrew reason Assistant onto our of wholesale a is platform, number built our new

our some various being integration dramatically to to we And we onboarding. shared ease – that’s meaningful of And use relevant is the EHR process ease think so going to platforms. able a of what of kind on version – first yesterday accomplishment of first pretty the information on

well. help when think of And going about Clover across interesting different leverage thing I as lines that’s the really to other business. So think we Assistant ability to the

Assistant, let’s Clover X. MA have – let’s a for going up contracting say, for if that would practice. let’s contracting, but been is to direct so that, but in is prong practice the has was that practice Clover Direct on yet coverage live lives, January unlock say, signs And say not essentially

we might that for have Assistant on goes up. then practice the live take XX Clover lives, direct if of So contracting, practices up Clover less getting than signs that but probability MA

Kevin Fischbeck

sense. makes you. Okay, Thank

Operator

comes Our with Lisa question Gill JPMorgan. from next

Cal Sternick

a on Hi, Can direct your some changed changes and through your Thanks. This good revenue are you expectations walk be first recognition, the from prior sort just the in it guidance obviously the to in for of mechanics of afternoon. on big want versus was what contracting Sternick because step and Cal quarter? just is clear what the Lisa. up

Joe Wagner

unique spend The Yes. would Yes, owned, relationship statements. take be I’ll mean are say their other contracting income their one some been of of we’ve fully that publicly fully traded recorded as is one. many are contracted. that since revenue our some a with happy giving at-risk terms presence of is in thing every entity last on direction direct I the aware the entirety physicians, Yes, with the that year have to companies Medicare been

industry. is to be along one so relevant continues we not And answer, was for one and entire kind knew of not there the all answer that kind there of

auditors And we our at conservative position took with on discussions because of time. so that, based the a

be As no final be those revenue program those government recorded, as chance we that wouldn’t the we and continue continue was view. a we consensus full to there new at-risk knew permitted – again, discussions,

more auditors, via we’ve with our only SEC, but at other kind firms. As of not we the accounting discussions it looked more, had

end recorded we’re our think side much because then based really our for was it determined opposed appropriate And piece impact not individual unique we going that DCE but makes obviously, this and accounting the at-risk up small also only materially revenue. – about to our being kind on that not of to our has each to on Medicare in of So just would I – really we be therefore very guidance for smaller. And our as conservative benchmark guidance. the And business as that, be spend the why us our all and for of to quarter revenue. adjusting something of that that revenue desire fact of that’s forward. was on again, it revenue sense But overpromise circumstances an view be that

Vivek Garipalli

terminations as confirmation point, conversations And were on XXX% at to how to making having a was we into But I take I around appropriate to not to that our just surprise position give Joe’s they add is Joe. revenue the it think recognition program, were work, given in accounting Thanks felt us. that, it externally. to a auditor new time was, we we account was a would this, to were think definitely not the

Cal Sternick

that? when expect trend Okay. on back also and CMS the get that mentioned guidance more recognition, And would that impact your how maybe could Can benchmarks. retrospectively you you a could you revenue elaborate some on bit just to

Andrew Toy

Yes, trend handle on one. used CMS a I – was determining the to that to can that ability Every adjustments quarterly has factor make the basis, retroactive benchmarks. in

are final you fixed that would your revenue risk again, underlying movement, a got movement, to obviously, be I the so you currently of have got things that not until contracting our there MA, complete lot data Under got, is and some bid as scores. and used to determine fixed. your But you given is year. a And that may have say, are limited of there where settlement opposed have some for is –

factors these makes benchmarks. determine national at CMS that as quarterly adjustments again, so, to data are both they looking And regional that as to the well use data trend

ability which know we don’t those can’t We do CMS. QX. our record we going has could those adjustments CMS And that those have. know, to but we know retro will we early – data the under the be, It that by it’s QX But make additional as made so don’t that be we the provide are the are could program. CMS for Obviously, trends to us, way of adjustments confines adjustments go. data, we actively exactly

Cal Sternick

roughly the for you you Got margins quarter, I the how this profitability guys mean, above I direct breakeven thinking think it? could that are like but was for for be had MLR year? for the balance of And contracting looks year. and then about the it while contracting, direct it a suggested ago,

Vivek Garipalli

think data this May I And there next a back a I as effect we better think putting that because a took have position of programs is in not approach understanding normalized basis, a the – really have the views in there received, enough Joe referenced And conclusions. because with half. earlier, QX. are and well, is quarters is it lot initial On format it clear all – April probably is we have we a as to we any the quarter point and or take think to form. still, us will that only two may we at place will to in in for we the form be

Cal Sternick

just And for last me. one Alright.

notable is some today? then that much non-COVID direct are from you saw direct charge PDR, you talk on things contracting inpatient anything, related higher costs. anything COVID the mentioned versus Can then, utilization how you do You the and lives? outpatient on also, And costs you side? how of to MA there see stand seeing where And tracking about is

Joe Wagner

Yes.

Vivek Garipalli

hit and to want you if the Joe, PDR then…?

Joe Wagner

Yes.

Vivek Garipalli

want thinking you can I kind forward. our PDR If hit in-patient, COVID going of to on hit the

Joe Wagner

Yes.

I those. two So, again will of answer

It’s On the amortized that’s again, quarters. – just two accrued PDR, M&A intra-year was in it to really to our this charge. we business. going And Basically, next over an be quarter. that’s the related

timing that’s So, a on issue just the M&A just side. really

MCR the then bit have direct hit going we a fully just out in may our calculations. about am side, M&A – that’s be to and I then the on little can So, normalized seen I in-patient call talk costs, in-patient, on the side. which – obviously, COVID we will Vivek And

that are side, – of of though side have acuity that call of standpoint, worth of view, we to on side. us at I is even point. material for themselves this kind the is as future what kind calculation outpatient see give normalized the Again, way. the the kind are on from would on that’s necessarily we we say calling higher acuity not a seeing, all we that there any manifesting of terms in exacerbation in-patient we that Again, that conditions, in-patient nothing out some increase pause, just an in in-patient So, and seen it,

Vivek Garipalli

the we remainder mean, Thanks in just years. obviously, of about calendar as year, terms about I think COVID doesn’t for Joe. impact COVID care And

my And view, view, my I personal so, just just how not personal on represent but in think Clover’s view terms just so about of from – COVID impact.

uptick And so, utilization. an obviously is driving the what’s variant really in hospital Delta

time, the probably vaccine. my first I Pfizer an mRNA approval think FDA I it’s the think In same approval comes, pretty Moderna. starting with probably for knowledge, at as soon,

of back And towards are think, booster probably going pretty going the shots to vaccine you this production be, the I approvals subsequent closer of seeing up or half, dramatically, of end are And to rapid. back half so pretty capacity online, year. the coming

say new more months, science the will and variants pretty do path those variance, more from like chance the vaccine XX% countries like in and But coming probable would out we capacity derived see, roll ability to my outcome. a greater vaccination I I have increased least who it shots, seems at over a account we just to a eventually I will from next that taking normalization, XX come, the more particularly immunocompromised. So, than think from the from But that think to perspective. perspective, are United year States, see production, rates, into low booster

Cal Sternick

Great. very much. Thanks

Operator

question with from next Giacobbe comes Our Citi. Ralph

Ralph Giacobbe

Thanks.

quick a it you me. stuff XQ? from or the is in normalized how of to I largely looked changes definition That’s and few at MLR adjustment, just the XQ? XQ guess the have for one Just there terms change other risk in

Vivek Garipalli

so it’s. Yes,

Joe Wagner

ahead. Sorry. Go

Vivek Garipalli

Go Yes, Joe. sorry. ahead

Joe Wagner

we think it essentially, business I to is, we internally is – mean, we to that second sure the look That’s extracting Yes. COVID. the anything that quarter we relates is determined in what as are the make way that run really we temporary

second what deferred And piece, see okay. result of that as so done and say, estimate kind And our is a the adjustment team. and also, help the you quarter, finalizing care actuarial pent-up risk our In demand there up have yes then obviously, with COVID. of of really so of we firming of

comfortable the And So, think is yes, how we as a definition differences. about we feel just so really again, our we those this are that run main business. about

Ralph Giacobbe

a think, guidance, but the what Is lower, related risk Okay, live revenue MA that alright. just then Fair or I bit the assumption? to And little that revenue stayed enough. the changed adjustment, same.

Joe Wagner

Ralph, more Yes. anything else. just timing than more it’s

the more are ended. probably more seeing third kind in is – a growth back already bit growth some probably the quarter. We It’s of little

are the seeing a of results back the that year, about. some benefit instituted For positive we grocery we think, we

nothing is there adjustment there. to so related And really risk

of adjustment. on piece mostly and risk the come small very MA it’s the just is side. board the very, how timing due some a on to of But think membership I it’s quickly

Ralph Giacobbe

it base. a guess, new this total obviously GAAP did Okay, like it’s MLR population line it’s us fair sense book the you I you for a clearly, looks is can quarter? give in how enough. on a the So And then for just basis, direct contracting which But like, around aggregate. XXX% math, on with

much MA has existing sense May. have point. of guess, a get I and still to how from visibility sounds like It trying Clover on benefit only just you some I Your Assist you that am really April have

are you you in how comfortable this terms book from that I guess, a guys how So, quarter of perspective? GAAP

Joe Wagner

later flowing end Assist some in up some loss that. in and the we because that will there And stop like have to on, think, fact things other said, think assumptions will are some numbers those had I No, on recorded pick with second things position a we it year, as data, relates half, us took things the and Clover fairly Yes. of and we we limited that which that conservative likely how I the are timing along Ralph. that, right benefit through very as up with

we conservatively. there to data say of in able have that. make kind even don’t do again, some the would of much normalize. some are about clearly have we because I a view and there didn’t that pent-up in costs COVID year, we not enough there, It’s And and so know yet demand. a have is claims, And were had took else. We to that conservative We ton where feel we but be booked we fact it the comfortable later really visibility, we of of again,

to able kind quantify been yet haven’t that. of We

haven’t at least I So, was, that the limited in I data again, you conservative I what expected. on based here we that again, have. in think than see QX population do anything that what that different of we we had think, think, seen MCR, view that represents But

Ralph Giacobbe

Okay, enough. Thank you. fair

Derrick Nueman

questions software and of will got, Starting Clover with? go or are we advantages compared trying retail community Stekelenburg. some what competitors to have the coming the first replace Assistant have And this we to Andrew does Toy, Maarten one compete the from Alright. with to

Andrew Toy

question. that Thanks Yes. for

are aspects, care can seeing a longitudinal advantage. big internally are here, person’s all press your that provide which visit are there MLR and discussed And is the data, health view to data EHR, Assistant one Assistant. rate internally that just that of because And provide this most are we additional system, from top just to having we in that flows that that’s we Because versus team, release. to Clover health scales of we and of through plan, one, information. Clover in from think means a your coming the lot counties through is all Clover for advantages just of Assistant them, our Quickly able the definitely we running we of As that’s the effect with that. number

[Technical software, Second annual be sort visits what or wellness of norm. which is of Difficulty] tends all, to the

provide from within let of is minutes and five of we as clinical that think then teams from we focus a to have given of and time lot per we their are lot what to the where And thirdly, to those our know use effort product analytics any with So, very get focused well. benefit analysis very personalized, for visits, a PCPs attention. And visit. best I

recent might features to drawing to a help complaints, are manage that might lot attention of the see hospitalization. them those outside their primary so attention we conditions And that we our even And with that well. be directing as engagement mean –

the are the we lot is markets there MLR just the both that from fitting as discussed. platform technology differentiation So, I our perspective, we our to a think in flow of plus, that through and seeing data points and impact

Derrick Nueman

Medicare retail How realized? see question be lot do Clover? Livent Advantage? on who How the sharing how on Vivek And will providers material risk post from did to next happens to The with of compared is being Vivek? unit a towards take board. arrangements Great. you the Clover targeted a often revenue contractor economics DC

Vivek Garipalli

Thanks, Andrew.

materials. Just great is been that some want definitely to echo there

there post to was direct media one – found thoughtful contracting. written on him of by a be I think I more pieces the about And there. out

question. terms of in just full – a Just

its In MA, have constructed terms DCE just our the versus we of what’s economics revenue very of unit I think interesting is business about model provider way really much focused.

infrastructure so the line traditional of business. a our really And about payer effectively. managing manage relationship physician when we The operating separate think to each is have you about business with way organizations, the we think

so to OpEx is as incremental practice. are And in of MA part manage lives that, the DCE that the Clover less lives that to much relative

contracting. partners to question. not direct but do attractive is And from on time lot a reasonable MA, standpoint, margins the in a we mind Joe, believe of direct So, meaningful practice just a then two the gross opportunity as there of parts us Clover synergies and margin contracting. do am operating pretty I there generate sorry, mentioning you on is over other with

Derrick Nueman

how was on question the agreements often do risk-sharing you with of providers contracted part see last The take Clover?

Joe Wagner

Yes.

sharing. So it have risk definitely we a Advantage unique and as lens Medicare a bit on of relates to –

So, within Advantage full risk-sharing called Medicare is capitation.

So, a percentage that’s get where significant will premiums. a practice of

who the news about payers, and large talking folks risk amount a practices at lot controversy fully been within inflation huge follow various Medicare adjustment happens have we to experts, are a have What who capitated. learned definitely of inflation. Advantage, worked those lot a seen adjustment so risk industry there and risk-adjustment of has And around of the and that

I starting to is and the more folks more this forth. by understood and out so community regulatory in get think well

the of full do around we behavior, incentivize the risk capitation particularly think so coding. wrong times And lot a can actually adjustment

is Assistant when those are it their around we getting other that a financial we with think any for so ensuring clinical about around or is setting at and ensuring up one the really perspective with Clover no proud coding. Clover using removes things of that the patients, the are of from of they our alignment way and one that there so it’s but value out physicians, of physicians alignment very incentives incentives And

so about management, cost the folks risk the practices is around sense of And around is it’s that think makes huge right a the patient. way value really a aligning for and that risk-sharing unfortunately, if way amount to adjustment. a get But risk-sharing actually plans

Derrick Nueman

Andrew, Clover which targeted Assistant How towards is going comes retail Great. physicians? you to Moomba And be from do market our question, final XX. to

Andrew Toy

Yes, great question.

help Assistant from care, provide for We our then platform, helps flagship personalized Clover to helps to members, them technology directly it So it helps reminder, performance charge provide but we better a as and it there. physician, don’t physicians. to data-driven them which plan Clover our is definitely it primary

So, to the for software. don’t have we charge actually

So, go piece primary to say do and we and a out our it that software a market pay actually we per as of of there care we don’t is Assistant Clover well are se want that. but we means for data-driven selling, pay doing more,

which constantly that, net scores, with we to we we addition tell always we feedback. and measure are hey, to our promoter measure physicians, and them, we satisfaction rate then open In share our

about higher to about those physicians, rates engagement spending over visit to measuring most continually feedback R&D I the talked you we are talked in are that more there. are And that data. constantly top and from up then we drive investing rate because there. which able then that time we features Vivek the reactive leads earlier, what And very counties in so We are useful our find to

physician job. emphasize We clinical lot when thinking a a care. insight do better meeting about primary we are to to want group, on of them we we a with data So, care share help

coming we said integrations, from engagement fairly soon to thing am that those want on without out be we the about excited all achieved only Clover them we further with but risk Vivek now, those will upcoming. EHR want achieved them putting of rates CA. think rates I our because have And just like we engagement very for useful that, shared very software. very without methods, are very, launched having Just CA capitation is will And impact our or up. that yet at drive via that see platform. X.X we of wave And Assistant. we to more we And that pay which really also high of give even will even The

Derrick Nueman

retail Operator, for Great. of you think comments? the do this closing want I anything our Vivek, portion say to concludes call.

Vivek Garipalli

Thanks, Derrick.

And give And a for and team we many whole you the far many, the of again thank year. on to so efforts have this year us about great excited Clover. the been Just thank at want you rest for are to to partner Clover of Joe, come. to their quarters you all a extremely – and

I are at we Clover. very think innings we believe reiterate, early very, possible of to the in just what’s

Operator

conference. may And this disconnect. Thank today’s and for now you you. Thank your you concludes participation

Clover Health Investments (CLOV) 12 Aug 212021 Q2 Earnings call transcript