Earnings call transcript Q2 2023

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Operator

Ladies and gentlemen, good afternoon, and welcome to the Clover Health Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. [Operator Instructions].

As a reminder, today's call is being recorded.

to for call Clover like Schmidt, to now Relations Investor Health. would turn over the Ryan I Please go ahead, sir.

Ryan Schmidt

Good afternoon, everyone.

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

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

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

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

Andrew Toy

basis, our Adjusted reported public everyone by insurance was joining a thanks primarily EBITDA and $XX significant Ryan, you, our in Thank results as us. very Today, first was quarter company. that in rapid QX segment. for On million, journey adjusted profitability. outperformance an we our strong profitable milestone another represent EBITDA driven towards sustained

approach delivering wide home it, members a via the of implement wherever care of began testament Clover practice. in is homecare in to Assistant the and network need Our strategic of strong powered holistic directly initiatives to result strength our performance to our our the from PCPs we is XXXX the our that

without the sustained quite and quarter’s necessity laser been this focused capital. additional we reasonably momentum that could means meaningful raising I our achieve last to believe achieve on profitability, We've strategies this of

increase Focusing compared as revenue we QX also the last insurance an of at a reported XX% of MCR first representing best segment company million, public our to for segment XX.X% ever its The quarter. on business, reported of $XXX year.

period to This of QX, There is modeling appropriately most world due our development QX. in-flight resulting when in booked modeling conservative of is performance related in that prior real to which QX. into favorable exceeds is improvement initiatives, and is PPD our QX

this life based plan MA increased type PPD our network Within operations, focus year, our of Given opportunities indeed integrity real this favorable we see to functions. improvement our on of we've more in bid active from focus refined our progresses, our and year of the continual on more optimizing including updates initiatives. number on may investment as payment pricing, to continued a areas, management,

Of be clear over our note, Clover improvement Clover basis points not. in a X,XXX to value for contributing who do primary well MCR use to members whose wide driver returning continues those as compared Assistant PCPs Assistant care network, of

trajectory their and been CA effectiveness changing constantly that continually We have features, care of CA's also at launching is believe improving.

in-home capabilities members. sickest also have of needs care of continued developing the Homecare, our our the manage help Clover We to practice,

from free Homecare to our member As primary and the house care and is Clover delivers a reminder, calls nurses. doctors

not utilization enrolled compared in For when we're the seeing program. to sick reduced members homecare, similarly in-patient within materially continually members

of end and increased enrollment care of life in programs. palliative seeing our members also We're hospice

expect these the more year. their constantly we our more As we looking effects and land all in of and through economics we see I to as in our areas, mentioned, capabilities to improve are planned of proceed

a Advantage this other MA book, when you greater of remarkable year has results members consider makeup that plans. percentage note business I'd are of also Medicare are to we've compared membership considered the to as low income more the reported even similar our our for as who our like

disease comprehensively has of sustainable a demonstrates that while has population this burden and our generally still our to also ability health to support this power difficulty economics shown We population, technology-centric the accessing have delivering support equity. Studies higher model believe appropriate that care.

CMS has of years. have like system plans ours and equity, recognized that the have rating for to the future prioritized made adjustments importance health star

the the what CMS changes While support look we current favorable to believe tailwinds this the won't we will forward making and down affect stars road. is be cycle,

leverage the and membership. Turning to backdrop performance XXXX half XXXX, now penetration where on of regional we core of strategy markets, our Against in CA our scale accelerate the our strong to bid our our growth. look first focuses amongst

core have to room we so overall share. of still maintain our this driven performance increase plenty and far Our markets market our year,

see advantage to long-term our than ability care, contracting strong protocols. in use managed sustain Because the growth to performance PPO we as Overall, popular rely network dynamically manage Clover Assistant Clover the to care rather on market. we

sustained they of back compete attractiveness the it level And lack back evidence, which PPOs growth of the without software will them to we're bids flip is PPO, profitability. to our marketability look pull and so to to with on as difficult sustainable infrastructure positioned plans agility. switch well and their The once a we drive powered to other approach. generally force maintain to establish believe We technology find this will it,

for on and we the ahead driving company, activities Assistant the are Clover Clover insurance, increasing real value remain growing that focused like coverage. Looking Homecare for

excited on continue initiatives be not laurels and to we ensure on addition, coming Clover In management care months that momentum new and system to build XXXX. going features our into in the additional our resting going exciting launching to we're are

these detail reducing will our to by more momentum continue as insurance these our efforts SG&A. future, on reaching in on the improving profitability of MedEx we long-term These growing believe while in care key our half levers first managing profitability. the results we and but build adjusted prioritize revenue, are into dig to business I'll

to to technology ability optimistic our among our for other provide a taking non-insurance as Lastly, Assistant about things providers. partner remain Clover segment, risk we

MCR segment an on non-insurance the million. delivered of revenue of XX.X% QX, For $XXX

and We continue over profitability positive see as segment gross long increased to term. making drive the margin this are value investments and a to

we've said business portfolio various the of our of As potential new profile entire provides offers diversify better also the overall revenue past, risk for business. opportunities the balance the this and streams to line to in

our will since to going last getting More While exciting right-sized of in area terms focus year a has we amounts been this total very here. forward. this come of think area risk, be

for Scott turn more it to detailed I'll Now over update. financial a

Scott Leffler

second then review Andrew. first cover Thanks, full XXXX. financial I'll year and quarter the for highlights outlook improved our

last a first improved profit of of to reduction a ever and loss adjusted of million EBITDA a QX relative adjusted public from driven EBITDA $XX the period. lines business QX quarterly adjusted As in Andrew year, mentioned, from by of to prior both of as contributions this a SG&A $XX million company year in year in

to XX.X% year, segment, in last QX XX.X% strong insurance on improved start in of our to MCR QX momentum the building had year. we from For the

The XX% in prior some PPD. driven most period QX this second prior performance QX million to quarter impact, that and of growth include primarily by XX% favorability was revenue minimal year-to-date XX.X% of MCR to million. period does result growth contains year. related of MCR to our only $XXX but year-to-date $XXX of Similarly,

by We're PMPM basis, X% levels expenses regarding prior market year-to-date X% the on modest to in PMPM recently and space. relative discussion period, significant with for medical second been year our in for up a quarter utilization both their only seeing periods. increases There's the comparable the MedEx in

product are planned operational we the and design headwinds. the said, impact likely enhancements, homecare our payment more integrity capabilities, expense from our the helping to increasing any efforts medical clinical macro Andrew investing and initiatives believe adverse over from time, initiatives As on updates always in these impact to medical We CA. including business focused bend cost curve network, the of moderate are

this our Like QX year. complemented our for environment, paid adjusted full would results, high managed our positions X.X will us also in change the I performance, by for level, PPO the performance EBITDA say well was improvement strength At XXXX. sustainable, cost half is then and favorably step a first for of on stars QX the impacted revenue half us into being XXXX year that believe profitability continue second by we our encourages medical plan

to revenue a our narrower previously the on strategic period providers. participant declined primarily of non-insurance focus million, group driven XX% discussed versus by Our prior year segment $XXX

in MCR quarter second was the non-insurance XX.X%. XX.X% the Our of with year-to-date MCR

from with of in MCR a last an XXX.X% QX for XXX% for performance quarter. were in That and significant in the year-to-date June XXXX. These improvement period our expectations year of represents the results line

which from conservative a maintaining segment. in last data the expectation lag to we year, Given CMS under created variability throughout this program, the and approach are typical

impact QX quarter transformation savings of during is these our reduction partnership our initiatives be $XX were Second beginning most that previous SG&A XXXX. of contemplated the X% guidance however, reported that only a and early are UST already and seeing of we this quarter realized the broader of will in improved year. of cost to project, note, underway, HealthProof actively QX the benefits I'll in adjusted is those first earlier the XXXX. saving from some $XX million million, with that

HealthProof economies order orderly a streams We are transition-related excited of efficiencies and our a accelerating note reported to ecosystem. the in of we There remain intentionally number transfer advantage and that to scale of take of HealthProof that more facilitate payment financials, UST the some work are have inventory brings. claims I'll UST on impact and that operational to

how reduction cash payments our a higher One of very example cash has financial is claims and in high proportion in this have manifests in outstanding already near-term claims settled. corresponding This decline QX. of as statements in resulted our claims a of in been

to return We effect regular complete to expect claims transition cycle. longer we this payment a and normalize the as

equivalents finished basis $XXX unrestricted Turning totaling unregulated and parent $XXX a to consolidated balance million subsidiary with at sheet. cash, cash the level. with restricted quarter the second and investments the entity million on and We

is do that, opportunistic to improve where that performance need to is intent our improvement an our financial continue and consider sub-teams we performance to and additional QX to said financing not step towards Our do objective. capital, point we increase in Having important the liquidity.

update year I'll Finally, an full guidance. to provide our XXXX

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

We improving range guidance a of insurance XX%. MCR to to also are XX%

We $XXX million MCR of and are $XXX a of million at maintaining to range XX% non-insurance to our previous guidance XXX%. revenue

These EBITDA maintaining changes and improved $XXX our in million. million of result million. of an negative are previously $XX million adjusted and We $XXX SG&A between guidance $XXX guidance negative adjusted for between issued

this business MCR us operational segments, to along initiatives gross both generating Our for profit even and year achieve should momentum into and heading with create XXXX. reduce SG&A continued more for improving focus on efficiencies

for year, sight of line basis we adjusted to Given first achieving XXXX expectation the the our on strong and even EBITDA now half of better full our profitability an in an performance full year updated for have XXXX.

our momentum profitability. sharing accelerating growth on build other We on forward the to look on in order side is of year as progresses. updates to our aim efforts Our begin once to the more

to I'll some turn back comments. final for that, With call Andrew the

Andrew Toy

tissue that with Assistant Thanks, differentiated physician the compelling Scott. shown offerings ties that together and ability need that The platform. timeline diseases. the have management a early our and ACO our Clover a connective of we We it believe for of change our technology, care delivers by and Medicare, physicians there's now chronic is identification to homecare helping

by differentiated want of also software consider we that healthcare, built clinical reemphasize insurer. adoption certainly our in for for in We software its highly platform level to an

today The being world of of advancements, Clover and practice. exactly and network, plan our MA across constantly physicians AI healthcare we ACO a and in is different company. the in our technology by used across thousands fundamentally evolving that's under makes live what umbrella technology homecare our is Our

medication out medication well medications outcomes. responsibility are think access as that both to bear together great picking Assistant when Managed resulting able feature improve their example deep chronic to By Clover outcomes. is data adherence fills. their Clover of PBM new ways data linking the to through Part that accountability are in those specific new health Assistant, recently for At a of We've up in rolled as a not flag member we increase this. patients is to and subsequent for developing conditions, care organizations use Clover, health data, physicians D constantly I a to

than data hand, even This necessarily at result improve help care a sharing research white them EHRs, lab with chronic We've those enrollees According physicians way. how insights an Clover's highlights by work in their a data readily how have highlighting shared indicating actionable Stage half a don't the quickly system have recently our disease. with with report, also and need they CKD less can clinical kidney to MA diagnosis. paper X of CMS actually a

and diagnosis In with outlined rate of and decline chronic Assistant Clover earlier management stroke. in paper, Clover earlier disease CKD heart of our negative empowers CKD doctors its those doctors’ that is physicians treatment shows failure, the also outcomes like and believe in to of that lowers then progression, demonstrates We diagnosed function disease health use we Research that kidney the attacks, risk a being paper of kidney kidney reduction after Assistant this earlier, using diagnosis. identify begin earlier. associated which correlated

core, synthesizes cloud-based and platform Clover is to clinical a aggregates, Assistant system its data generate At normalizes AI disparate actionable that streams insights.

and XXX constructed corpus serve algorithms. have laboratories, direct different that benefit our learning clinical pharmacy We documents over radiology EHR registries, painstakingly types providers, others as of health hospitals, and including connections, underpinning the proprietary of information AI managers, a millions sources, of machine for of well exchanges, regional

world these with providers end, building powered focused diagnoses engaged also dozens property of treatment proud pending recommendations. for we we of Since intellectual have internally are AI said platform. that are real Clover And net unique that on and built our patents or at inception, Clover. to I've of registered Assistant’s millions to new thousands always have

will this We’ll this dive an year at platform to earnings to of later provide looking which and the into is our Clover time I'm grant more outside more the of We showcase very share that much plan deep technology on Assistant all. even to context later us our details with date. you event a something forward event,

Q&A. let's that, With to on move

Operator

research will questions analysts. Instructions]. from We our Clover’s be [Operator taking

Citigroup. from comes Jason Cassorla, question first Our

Benjamin Rossi

Thanks Hi, taking my for question. everyone.

have You for Rossi Jason. Ben on

million about the your in current So thinking of would at that’s thinking XX EBITDA would of here which of negative million half swing midpoint, guidance the EBITDA some moving midpoint negative EBITDA your towards math adjusted million, year-to-date XXXX quarter. as I'm my guidance with changes, XX updated pieces XX about XX during suggest your by about that I the EBITDA new and about a million suggest back negative a

think that the I XQ of the could walk back of still And how me losses? mentioned could of you actions half bridge help development. you with the some me But I million kind assumes of EBITDA figure? this aided year period prior just through reserve Thanks. then to that XX

Scott Leffler

Sure. for This question. the is Scott. Thanks

the point. the year-to-date MA terms earlier outstanding as outperformance we comments, focus So performance XX.X% think unpacking in helpful mentioned I it's of as of your reference driver that our year-to-date MCR to just first is in of And on half in year. really our the of the

have the is the terms we said any in going a for guidance we that number appropriately any obviously going As period, for follow quarters our be XXXX half in and year to like year, conservative, of back back of do model. last for of to forward-looking guidance

have appropriate performance, Other again at look by the the from the for EBITDA level is our same changes to So we've performance, when than that guidance adjusted for changed previously significantly that, of being which not non-insurance have the of guidance MA you SG&A issued guidance that business. line MCR year-to-date nor driven past. in terms we conservatism of changed in the just guidance, there's mentioned that we

the is then performance change really performance. half line second MA resides. it in It's the the and driving our for revenue So insurance half and business the where outperformance front slight MCR

Benjamin Rossi

ahead in looking you offerings design changes follow MA strategy? your some your rate benefit that, latest with of you're on And okay. some the it, light have the your quick approach in Home how bids of to to thoughts and or offerings announcement to on some of year peripheral LiveHealthy model your up your describe for would footprint How through the Clover [indiscernible]? Rewards, Home such as I a risk next Just Got some XXXX. incorporating Health Assistant, go-forward Health Thanks. -- geographic bidding any maybe of changes maybe in

Andrew Toy

Yes, sure.

Andrew. So this is

year core closer that later a AEP. So in high as our remarks in on level, did to the little and come focus more we as our that geographies. to intend the talk certainly we future our get At to describe to a we about speak excited we in offerings, we're

did expanding where that within to means we strategy core our that as we are starting as through think of follow the a We continue historically, Scott driving optimize markets. reflect so we are improvement core much this we additional year now. that markets there mentioned to lot we our have progress year that that also And And that just is there. not made as last be

for be to those -- coverage wide in CA going in member having our desire strategy. continue to really products strong network markets our So in great having PPO those main our are markets,

We've things can and powered mentioned we and members data powered members areas Assistant like get past, popularity LiveHealthy in for healthy virtuous those our Clover visits whereby well. of reward for getting We that in particular behaviors, behaviors, cycle rewards. for them rewarded where have get healthy where care a seen the as is particular we those

be to continue that excited going we So forward. by

I remark are our core believe popular product that wide people we truly want the this built Clover there. think advantage is is PPO really that Lastly, on harness that that as out will we do we very network

We our continue of lets having year-after-year. the us We PPOs to were for it's a we fundamental network, manage have, Assistant, lead is moat of offer with really product. don't that other offering it. And in care advantage one that It's and which wide the PPO our that on model. why leaders Clover we think something

Operator

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

Adam Ron

Adam for Ron is This Kevin. on going? it How’s Hi.

commentary Just this I'm going the year, utilization curious. to just back

your it. of cost how I some that up But even from You peers are about macro that's digits. single medical pretty PMPM only comments and said you think was headwinds made different some about talking like trend the

your anything and you're for post the ramp, on MLR half elaborate incorporated potentially you would into visibility into helpful? So first if QX if claims just that seeing very more that's is curious and be what could back half,

Scott Leffler

Sure.

PMPM the So shows mentioned performance an comments of about what previous basis, we our I increase is on a year-to-date think during PMPM. that MedEx X%

believe I some observation impact And comments what is from helping these so and us to we've and that of favorable operational think some I your CA relative macro-oriented initiatives, of some on, in are so of internal the lot insulate to those the seen headlines. minute a that from to that I that including performance the be enhancements a we headwinds. And correct a ago mentioned my better seems of in of impact think

X% experiencing consistent broader is that the not So I'm we're saying with the market.

that I possibility than that better the with it some but organic think there's good of our offsetting that's a we're broader initiatives. market,

Adam Ron

in And when in so other you saying want was accelerate XXXX, put you're the performance -- the together growth other better And this until words, for contemplated? of year. don't you similar should much benefit bids But so planning like to you're MLR growing expect side not shouldn't it and notice you we sounds designs? if on next performance similar year-to-date the performance profitability

Andrew Toy

we are Homecare to Clover do to Assistant, focused, to growth, on sustained that like like continue definitely. us return help you these excited said, Clover have profitability to we as Scott's just that be We to, advantages So making we MedEx. get to sure manage alluding

familiar very are our markets. core with We

indicated growth. to PPO us to we same of that you'll continue to wide back exciting I as MCRs, we members we think focus time, do. land return of And our as forward an return planned we these well do our to will some start MCR all have always to product, we're So on then the initiatives back able growth return are that and economics to to, those, focus able bring as as together, believe, all on certainly we at strengthen of to our as strengthen be we management, product, bid excited maintain area those when and that put of see to within

Operator

[Operator Instructions].

Our next Richard Close, from question comes Genuity. Canaccord

Richard Close

little to some the and questions and up. seems It I a follow maybe like for MA Clover point start about you wondering bit within the just if I Thanks was an have Yes. then congratulations. there. just can more degree. penetration you've inflection hit Assistant, And a talk

Andrew Toy

Yes, absolutely.

is Assistant, Clover powered folks constantly into doctor Assistant say. Clover we're data see getting working capabilities, always a using new releasing Simultaneously, unlocking getting you to Clover new clinician features, and who Clover on Assistant have Assistant. new as sources care, So we or be

on as Assistant effects So because software well, the the actually believe product. improving that's is actual the efficacy Clover of we of of one constantly continuous development

to members look has we like Clover for that's get unlocked getting be via care, enhanced reward, and to driven And which we care continue. Clover mentioned, something Assistant. part the we've popular been for our to Assistant a ways that of So new LiveHealthy actually rewarded primary which data powered is

the product the and it's economics. So with that's headed. is think that you that well. were we see our you'll results see landing as are with happy happy I And direction direction We headed can the within in the here

Richard Close

convey members are you rates it's that? like any in over like markets to penetration anything where or core of maybe But XX% like able now

Andrew Toy

Yes.

We’re not basis. quarterly sharing that information It's right now doing. on consider we'll something a

-- can will constantly will that share say to older work would have you I off. also moving And baseline that upwards always number used say we that and that say I to as the the on right. we And However, that are that number. we use focused to I

Richard Close

there percentage follow-up that? applicable core of any some the my in is is member that And sort is homecare. thoughts markets on that now? that all like And question to, is, the of just Is Okay. on base

Andrew Toy

Yes.

last our majority that mile that the basically, to markets neediest identify markets earlier a things and of really the needs reduce care mentioned able as where admissions, mile I our into can but that the now unmet So gap, part of vulnerable, closing needs. most that for like the is in-patient identify and we're as care in well. I our other said, homecare, to population, expand then, core core looking footprint actively right their Homecare And is like remarks. last of the of last are close we during critical we

as we're And bring possible. capabilities. to as looking its by many excited very markets we're to So it

Operator

Instructions]. [Operator

Andrew Toy

All right. Thank folks. you,

Clover Health Investments (CLOV) 9 Aug 232023 Q2 Earnings call transcript