Q1 2025 Clover Health Investments Corp Earnings Call
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Speaker Change: Ladies and gentlemen, good afternoon and welcome to the Clover Health First Quarter 2025 earnings conference call.
Speaker Change: At this time, all participants are in a listen only mode. A questioning intercession will follow the prepared remarks. At that time, if you wish to ask a question, please press star one on your telephone keypad. As a reminder, today's call is being recorded.
Speaker Change: I would now like to turn the call over to Ryan Schmidt, Investor Relations for Clover Health. Please go ahead.
Speaker Change: Good afternoon, everyone. Joining me on our call today to discuss the company's first quarter 2025 results are Andrew Toy, Clover Health, Chief Executive Officer, and Peter Kuipers, the company's Chief Financial Officer.
Speaker Change: You can find today's press release in the accompanying supplemental slides, as well as the company's most recent investor deck in the investor events and presentations section of our website at investors. cloverhealth.com
Speaker Change: This webcast has been recorded in a replay of the available in the Investor Relations section of the Clover Health website. I'd also like to caution you that we may make forward with the statements during today's call that are subject to risks and uncertainties, including expectations about future performance.
Speaker Change: Factors that may cause actual results to differ in material from expectations are detailed in our SEC filings, including in the Risk Factors section of our most recent annual report on Form 10K and other SEC filings.
Speaker Change: Information about non-GAAP financial measures referenced, including the reconciliation of those measures to GAAP measures can be found in the earnings materials available on our website.
Andrew Toy: All right, everyone. Thanks for joining us today. I'm excited to dive into our first quarter 2025 results. We've been working hard at Clover and it's really showing in our Medicare Advantage performance and overall business growth. Let's break down what we've accomplished and why it matters.
Andrew Toy: First, let's talk about MA plan growth where we're doing very well.
Andrew Toy: We've seen some significant numbers this quarter. We're looking at a 30% jump in MMA membership, 33% growth in our revenue, and a whopping 279% increase in adjusted EBITDA, year over year. That's not just numbers on a page, that's real momentum.
Andrew Toy: And what's driving this? It's our focus on getting people the right health care right when they need it, earlier higher quality and critically more affordable.
Andrew Toy: This isn't just about growth for growth's sake. It's about making a real difference in people's lives by lowering barriers in care, whether it be by reducing out of pocket costs or delivering care for them right in their homes.
Andrew Toy: We even released a new white paper last week showing how Clover Assistant helps better manage congestive heart failure, leading to better care and fewer hospital visits.
That's the kind of impact we're aiming for.
Andrew Toy: Next up, let's discuss our confidence in the rest of the year.
Andrew Toy: This course's performance really reinforces that we're on the right track to hit our full year 2025 goals and improve guidance.
Andrew Toy: We had a strong enrollment season and those new members are utilizing care at expected levels. That's key.
We're planning to keep this momentum going throughout the year.
Andrew Toy: But what's most important is how we're taking care of these new members.
Andrew Toy: We're using Clover Assistant to power their primary care, making sure they get the best health outcomes and the most efficient care. This isn't just about enrolling more seniors, it's about making sure we look at them in the right way.
Andrew Toy: Now, let's talk about how we're managing things behind the scenes.
Andrew Toy: Our Part C and Part D utilization costs are both tracking as expected.
Andrew Toy: We are also navigating the HEC V28 phase-in smoothly with Clover Assistant.
Andrew Toy: Why is this important? Because it shows our technology first, care model is adaptable and can handle changes in the industry.
Andrew Toy: We're not just reacting, we're staying ahead of the curve, making sure our members get better care management. That's a huge advantage for us.
Andrew Toy: A big part of our confidence comes from our control of our care model, whether in the YPPO network with PCP's using Clover Assistant or via home care in our Clover Care Services division, care is what we do.
Andrew Toy: Speaking of clover care services, our mission is simple, to deliver additional support to the clover members when and where they need it.
Andrew Toy: Every Clover member is eligible for a personalized in-home Clover care visit and coordinated care services tailored to their health journey.
Andrew Toy: We work closely with Clover Assistant using physicians to identify members needing support and deliver that support directly to them.
Andrew Toy: For example, our welcome home Clover Care Visit helps members transition from hospital
Andrew Toy: For members with the highest needs, we offer a comprehensive in-home care program focused on palliative and advanced illness support.
Andrew Toy: These services drive strong performance for our health plan and provide tailored, personalized care for our Clover members.
Andrew Toy: We're also pleased about the recent CMS final rate notice for 2026.
Andrew Toy: It's a positive for us and we'll add to our momentum, especially with our four-star PPO plan coming next year.
Andrew Toy: But let's be clear, our real strength is in our architecture and in our operations.
Andrew Toy: It's in our innovative care model, our wide networks, and the clinical and financial results we get from Clover Assistant.
Andrew Toy: I've spoken about this before, and I want to emphasize that we would feel good no matter what the rate notice was. That's because we're not just relying on favorable rates, we're building a solid foundation for long-term success.
Andrew Toy: Looking ahead, we see even more growth and profitability coming in 2026 and beyond.
Andrew Toy: This isn't just wishful thinking. It's based on our strategy of expanding Clover Assistance Reach, managing our members with personalized care, and the financial boost we'll get from our four-star rating.
Andrew Toy: It's too early to talk about bid specifics right now, but our intention is to keep building a growth flywheel, and we expect it to start spinning much faster as we go into next year.
Andrew Toy: And for areas where we don't have an NA plan, we're pushing forward with Counterpart Health.
Andrew Toy: We're seeing a great opportunity here to partner with others and bring Clover Assistant to even more people.
Andrew Toy: We're already working with several partners and we have more in the pipeline.
Andrew Toy: Organizations are seeing the value of counterpart assistant in improving care and managing costs and we believe this is a big area of growth for us.
Andrew Toy: To support this growing deal flow, we are actively taking steps to add implementation resources to ensure successful onboarding and integration for our partners.
Andrew Toy: I'm excited about traction in this area and I think the opportunity to bring theatre many people served by other MA plans is a very real one.
Andrew Toy: Finally, I want to highlight the real world impact of Clover assistance.
Andrew Toy: Our research shows that doctors using Clover assistance diagnose chronic kidney disease and diabetes earlier.
Andrew Toy: And we just released our latest paper on congestive heart failure, showing that Clover Assistant usage is associated with better care, fewer hospitalizations, and fewer readmissions related to CHF.
Andrew Toy: Clark failure is a huge issue and we're making a real difference. We're giving our doctors to tools they need to provide better care and it's showing in the results.
Andrew Toy: So, to sum it up, we've had a fantastic start to 2025.
Andrew Toy: Our approach, powered by Clover Assistant at our Home Care program, is driving strong growth in membership, revenue, and adjusted EBITDA. We're confident in our 2025 goals and excited about our future.
Andrew Toy: Now, I'll hand it over to Peter for the financial update.
Peter Kuipers: Thank you Andrew. First, let's start with the results and then I will call for the drivers in more detail.
Peter Kuipers: I'm very pleased with a strong first quarter performance, where we have delivered a combination of 30% membership growth.
Peter Kuipers: 33% total revenue growth while growing adjusted EBITDA by 279% and adjusted net income by 322% year-over-year.
We are executing very well against the strategy.
Let's now move it to the driver's
Starting with Membership and Revenue
Peter Kuipers: Insurance revenue grew by 34% year-over-year through $450 million, driven by 30% Medicare at Fanage Membership Growth, from Strong AEP and OEP Enrollment Teasants.
Peter Kuipers: Memor retention was also strong during both the AAP and OEP season.
Peter Kuipers: A first quarter results give us conviction in our new member cohort management strategy.
Peter Kuipers: Similar to AEP, the majority of our OEP growth occur in our core New Jersey markets where we have a strong Clover-assisted network presence.
Peter Kuipers: This is reflective of our pricing discipline, geographic growth strategy, and our efforts to actively engage with new members, vehicle over assistance, power of primary care.
Peter Kuipers: Given our experience over the last number of years, we have strong conviction that the unit economics for a new member cohort will improve. As we've seen on average, a more than than a 700-day-to-spoint improvement in loss ratios between year 1 and year 2 cohorts.
Peter Kuipers: and an approximate 1,500 basis points improvement between year one and year three cohort members.
Peter Kuipers: This demonstrates the effectiveness of a model of the long-term, sacrificing earlier and better care management at a lower total cost of care.
Peter Kuipers: Overall, we are confident that our medical costs are in line with expectations.
Peter Kuipers: We experienced elevated inpatient utilization in January from an uptick in lower intensity care related to a later cold and flu season.
Peter Kuipers: However, trends quickly normalized, starting in February and continue through March.
Peter Kuipers: Operationally, we continuously perform checks into our data and metrics for your prior authorizations, weekly claims and real-time, clover-resistant insights from provider interactions to identify patterns in our utilization.
focusing next on STNA.
and pleased with the operating leverage that we are demonstrating.
Peter Kuipers: of 360 basis points a year-to-year while absorbing the increased growth and variable cost associated with higher membership and a continuous strategic quality investments in our business.
Approximability metrics are strong.
Peter Kuipers: Gavinette Laws, during the first quarter of 2025, improved by $18 million a year-for-year through the loss of $1 million.
Peter Kuipers: First quarter of 2025 adjusted EBITDA, improved by 279% through a profit of $26 million.
Peter Kuipers: Similarly, adjusted net income grew by 322% a year for a year to a profit of 25 million dollars.
Lastly, insurance VER for the first quarter 2025 was 86.1%
Peter Kuipers: which represents a modest increase year-over-year, but importantly is in line with our expectations and consistent with our full year 2025 guidance given seasonality.
Peter Kuipers: We also note that one driver of the year for your increase in insurance VER was the implementation of our CA enabled affiliate entity within our operating structure.
Peter Kuipers: which the plan no employs to engage with fibers directly and better serve as a health plan and membership in New Jersey.
Peter Kuipers: The goal of its entity is to drive higher quality and better health outcomes for our members, via better care coordination services, unified care management, and a deeper focus on our partnerships with local physicians.
Peter Kuipers: Overall, we're proud of a strong result of this quarter. As we look ahead to the rest of the year, please note that we expect typical Medicare offense decisionality trends.
Peter Kuipers: in the form of higher utilization levels in the back half of the year.
Peter Kuipers: It's more of an impact in the fourth quarter of the year as it's difficult [inaudible]
Deathset, this is simply seasonality.
Peter Kuipers: Our first quarter performance reinforces our conviction and our improved 2025 guidance, which I will cover later in this call.
Peter Kuipers: Turning next to the balance sheet, we are pleased to announce that during the first quarter we have successfully repurchased.
Peter Kuipers: 5 million shares of common stock making up the remaining $80 million authorized under our Bi-Back program announced in May of last year.
Peter Kuipers: This strategic decision reflects our confidence in the company's long-term value and the strength of our balance sheet.
Peter Kuipers: We ended the first quarter of 2025 at Cash, Cash Equivalence and Infestments, so a link
Peter Kuipers: with $126 million at the parent entity and unregulated subsidiary level.
Peter Kuipers: Our unregulated cash was impacted by various working capital and timing dynamics as well as the stock by that program.
Peter Kuipers: We're confident that this balance will increase throughout the year, allowing us to operate for a position of strength as we invest in our growth model.
Peter Kuipers: During the first quarter of 2025, cash flow use and operating activities was $16 million and was similarly impacted by working capital and timing related dynamics.
Peter Kuipers: That said, given our business momentum, we continue to expect to be on pace to generate strong cash flow from operating activities for the full year.
Peter Kuipers: Days in claims payable was 37 days as of March 31st, 2025, representing a decrease of 22 days
Peter Kuipers: This reflects the normalization of our claims inventory in time units of claims payments to historical levels.
Peter Kuipers: If you recall at this time last year, we were simultaneously navigating the industry-wide Change Healthcare Incident, as well as a sensation for our back-office BPAS Medicare-Fanage
Peter Kuipers: We are pleased to report the successful conclusion of this and expect our claims payment patterns to now be at typical go-forward ranges.
Peter Kuipers: For our four years 2025 guidance, we believe that we are well positioned to accomplish our goals this year and are providing the following guidance updates.
Peter Kuipers: We are reconfirming our Medicare Spanish membership to average between 103,000 and 107,000 members.
Peter Kuipers: reflecting 30% growth year-over-year at the midpoint and continuous intra-year growth through the SCP periods in 2025, all driven by a robust plan benefits, competitive positioning
Peter Kuipers: We are also reconfirming our insurance revenue of between $1 billion, $800 million, and $1 billion, $875 million.
Peter Kuipers: Reflecting year-of-year growth of 37% at the midpoint of the range
Peter Kuipers: In tandem with our membership quote expectations, we anticipate more revenue in the second half of the year, as compared to the first half, unlike historical patterns.
Peter Kuipers: We are reconfirming our adjusted SDNA guidance to be between $355 million and $365 million.
Peter Kuipers: This represents adjusted SDNA as the percentage of total revenue of 19 to 20 percent and is an approximate 200 basis point decrease or improvement year-over-year at the midpoint of the range.
Peter Kuipers: We are increasing our 2025 adjusted EBITDA guidance to now be between $15 million and $70 million.
Peter Kuipers: Similarly, we are also increasing our 2025 adjusted net income guide to now be between $50 million and $70 million.
Peter Kuipers: Lastly, we continue to expect insurance VER to be within a range of 87% to 88%.
Andrew Toy: In totality, as Andrew mentioned, we delivered strong results and a very strong start to the year.
Peter Kuipers: Throughout the remainder of 2025, we look forward to continuing to balance our strong profitability profile.
Peter Kuipers: via exceptional core management to get over our strategic investments in new membership growth, Clover assistant technology, and expanding both a Clover home care services and counterpart health code of market strategy.
Thank you.
Peter Kuipers: As such, we have increased confection in our improved four-year 2025 guidance.
Peter Kuipers: and we believe that we are very well positioned for accelerated growth and profitability in the future.
Looking forward.
Peter Kuipers: First, we will continue to assess engrossed and expanding Clover's system technology and reach to better manage our new and returning memory cohorts.
Peter Kuipers: Second, we believe that we are very well positioned until when's going into 2026 due to an increase to a four-star payment year in 2026.
Peter Kuipers: Third, the expected compounding favorable impact from the recent CMS final rate notice, which is additive for the impact of the improved four-star rating.
fourth
Peter Kuipers: We expect the unit economics of a large new cohort of membership added in 2025 to significantly improve in 2026 and beyond.
Peter Kuipers: as well as continued maturation of our broader returning member cohorts.
Peter Kuipers: Lastly, we believe that there will be a continued impact for my efforts to gain operating leverage.
Andrew Toy: With that, let me now turn the call back to Andrew for closing comments.
Thanks, Peter.
Andrew Toy: In conclusion, we are incredibly proud of our strong start to 2025.
Andrew Toy: These first quarter results clearly demonstrate our ability to meaningfully grow membership, expand profitability and execute our strategic plan effectively.
Andrew Toy: Our differentiated model, powered by Clover Assistant and our clinically focused home care platform, is delivering tangible value and better clinical outcomes driving our strong Medicare Advantage performance.
Andrew Toy: We are confident in our improved full year 2025 guidance and are strategically investing in our growth model, managing our new and returning member cohorts and expanding Clover
Andrew Toy: These efforts are not only enhancing our current position, but also positioning us for accelerated growth and profitability in the future.
Andrew Toy: We remain excited about Clover's trajectory and are committed to driving long-term value for our members and shareholders alike.
With that, let's open it up for questions.
Speaker Change: Thank you. We will now be taking questions from Clover's research analysts. At this time, if you wish to ask a question, please press star one on your telephone keypad.
Andrew Toy: You may remove yourself from the key by pressing start 2. In the interest of time we ask the please limit yourself to one question and one quick follow-up.
Speaker Change: We will take our first question from Jonathan Yong with UBS.
Jonathan Young: Hey, thanks. Thanks for taking the question here. Just starting with the insurance business first.
Peter Kuipers: Yeah, thank you Jonathan, it's Peter. So overall costs trends are as expected. We also say that the both the new members cohorts and the returning members cohorts are also from an MCR and VR perspective trending in the way, both in actuals and what we see in the coming quarters as expected as well.
Speaker Change: Okay. And then, you know, we, we didn't hear much on counterpart health here, just, just any color on, you know, how that go to market strategy is progressing. If there's been any more, uh, bigger wins and kind of, uh, as we look ahead, when can we start seeing contribution? Thanks.
Speaker Change: Yeah, hey, Jonathan Sandrew. Yes, definitely remain excited about the counterpart business and we are looking to provide more updates on that as we go out throughout the year. We remind everybody that we are not necessarily intending to make announcements around every single deal that we make around there. However, we remain excited about it. All contributions, revenue, et cetera, will of course be in the consolidated financials as well. And we're going to be talking more about that as we proceeded in the quarter. But right now we're very...
Speaker Change: Focus on making sure that we improve profitability in the insurance segment.
Speaker Change: Once again, if you would like to ask a question, please press star one on your telephone and keep that down.
Speaker Change: We will go next to Matt Hewitt with Craig Hallum Capital.
Matt Hewitt: Good afternoon and thanks for taking the questions. Maybe first up and kind of sticking with the counterpart theme. Have you had, you know, some of it?
Speaker Change: I guess feedback or how of the initial implementations gone and what are you hearing from those partners regarding kind of the key metrics that you would be looking for once the platform is implemented and they've kind of had a chance to use it for a little bit.
Dr. Jones, Dr. Jones, Dr. Jones, Dr. Jones
Speaker Change: Yeah, thanks. So definitely what we're looking for and what we're aiming to do is to make sure that we deliver the amount of value within our counterpart customer base.
Speaker Change: as similar to what we see within our own MA plan and within the providers that use the assistant within our own network.
Speaker Change: So that's what our aim is. That's the power of the software approach is that we can develop the product, we can then use it to help manage care, to identify diseases earlier within almost any part of the Medicare population, whether it be on their own plan, whether it be with other people's plans, third party plans.
Speaker Change: So the key KPI that we're looking for there are do we still see the engagement with the physicians, do we still see the earlier diagnosis and management of diseases, do we still see improvement on the heatest side of things as we said we're very proud of our performance there. It's all the same metrics that we use within our own plan but translated into third-party counterpart usage. Thank you very much.
Speaker Change: and our initial data we feel optimistic on that, and our goal was that those would be effectively equivalent.
Speaker Change: That's great. And then maybe shifting gears a little bit, given some of your success over the past.
Speaker Change: College, you know, a couple of years. Has there been any changes in the competitive landscape? Are you seeing some of your peers adapting or, you know,
Speaker Change: Kind of shifting to your model a little bit more. Are you seeing any new competitive entrance and how does that kind of change your your game plan if at all? Thank you
[inaudible]
Speaker Change: Yeah, I think that what we see here is that we have been focused on the PPO and the wide network and managing care within that wide network for quite some time.
Speaker Change: and others have been focused, and this is perfectly legitimate as a model, but to value-based programs within their network, deploying those out, but rarely with a software backing, right? Like most people's development of software has been for employed physicians, it's been for insurance operations, and while those are both good things,
Speaker Change: The assistant counterpart, Clever Assistant, is usable by the broader wider network, and that is a distinct mode and advantage that we have. So that's something we're excited to bring as a model to drive clinical value to lots of different markets, lots of different places. We think we can look after a large percentage of the total Medicare population in the U.S.
Speaker Change: And I think that what we're seeing is that others have struggled a bit on the PPO and are pulling back on benefits.
Speaker Change: are perhaps not really investing as much as they use to cutting back on marketing, cutting back on commissions, and that is just a natural cycle of the market. We are studying, saying the course, we feel good about where we are, we feel that our model is working, we feel that it is highly differentiated.
Got it. All right. Thank you.
Speaker Change: Again, if you would like to ask your question, please press star one on your telephone keypad now. We'll go next to Richard Close with Canacor Genuity.
[inaudible]
Richard Close: Yes, congratulations on a great start to the year, first of all, you know, Andrew and Peter,
Speaker Change: You guys mentioned accelerated growth in the years to come. You talked about, you know, the growth flywheel and expect faster growth next year. So maybe can you break that down a little bit? You know, obviously your positive rate adjustment for next year and then the four stars, but
Speaker Change: How are you thinking about the building blocks to growth, and where's the acceleration come from beyond, I guess, you know, the positive on rate and star?
Speaker Change: Yeah, thank you very much. This is Peter. So what we see, of course, now also, now that we have...
Speaker Change: Experience of the large cohort joining the plant is here, that's a reconformation for us.
to really see the cohort economics for both new members.
Speaker Change: and then all sort of returning members, so that is a large factor.
Speaker Change: as we look at unit economics and profitability going to next year.
Speaker Change: Yes, that's all the rate notice will be until when, but with our model, we don't necessarily need that if you will.
Speaker Change: We are of course now looking at bits, some more news to come there, so like it, it'll be some adjustments there for a benefit perspective.
and then of course we also have, of course, the...
Speaker Change: Cost actions were taken as well, we have more leverage from an SDNA perspective also. And then lastly, we believe that from our product roadmap from a Clover Assistant technology perspective, we'll have additional impact as well, starting with the clinical side and then of course the results flowing through to the financials as well over time.
Speaker Change: Yeah, and then just shopping it here. Obviously, we are, as a reminder to all, is that we're going from a payment year, we're being paid on three and a half stars this year, and we'll be going to a paid on four stars next year, which affects the benchmark. And so we're looking at what we do, as Peter said, that we're still early on and we're not talking about bid just yet, but obviously we're factoring that into our bid discussions. Others might be moving downwards in our markets on the star rating. And so that will put some pressure on their benefits.
Speaker Change: We can, we think we have room, actually are moving upwards. We're moving upwards.
Speaker Change: Another dimension on that, as Peter said, was a lot of that's being driven by CA, CA helps our star ratings, we are very proud, you know.
Speaker Change: for the number one plan of over 2,000 lives on HEDIS under the star ratings. That's driven by our technology platform. We look to maintain that advantage going forward, which will help us with stars, which will help us with benefits too.
Speaker Change: First, in terms of New Jersey, obviously you have great penetration there, and I'm curious with respect to this accelerating growth.
How do you think about why? [inaudible]
Speaker Change: You know are you bumping up on you know where you can go in New Jersey and then do you have to go to new markets so that's one question and then the second part of the question is you mentioned this affiliated entity
Speaker Change: Related to BER, if you can go into that a little bit more for us as well.
Speaker Change: Yeah, I'll jump in on the first part, Richard. All the Peter Kuipers are the second part. Regarding you, Jersey, I think we have plenty of rooms to run.
Speaker Change: We have plenty of room within that market. We have our full platform deployed there. It's our home state like we feel a lot of affection for New Jersey. We have plenty of market share while we're proud of the market share position we have. We also have room to take on more market share there so. Thank you very much.
Speaker Change: You're really good about where we are there. That doesn't mean that we are not going to look at other Geos. That's not what I'm saying. I think we certainly will look at other Geos, but because we are just right around north of the 20% market share on non-sniff in New Jersey, we have plenty of room to go before we become saturated.
and I'll let Peter speak to the second part.
Peter Kuipers: Yeah, so when comparing the BER year of a year or sequentially quarter to quarter, a couple of things.
Peter Kuipers: to keep in mind as far as drivers, right? So, first of all, new members from the BER perspective are A-Hathwinds.
Peter Kuipers: that is then offset by returning members as well. Of course, we do have a somewhat...
Peter Kuipers: Elephate at Maddox Trentus, well over to the peers that that is much lower than competitors that do not have it clinically.
Technology-focused approach.
Peter Kuipers: There's a little bit of timing as well as for our PPD, and then lastly going back to the CA enabled.
Peter Kuipers: Affiliate entity that we signaled, I think, last year that we were setting up is really meant to drive higher quality and better care for members, so activities that entity is deploying include, for example, carochordination.
Peter Kuipers: Care Management, and also partnerships with local physicians. So that is a fourth factor if you look at both quarter of a quarter and year for year BDR.
Good, thank you.
Peter Kuipers: With no other questions, this will conclude the Q&A portion of today's conference. I would now like to turn the call back over to Andrew Toy for any additional or closing remarks.
Andrew Toy: Alright, thank you all again for joining us today and for the thoughtful questions. We appreciate your interesting Clover and look forward to getting you more in our next call. So have a great evening, everyone. Thank you.
Speaker Change: Thank you. This concludes today's Clover Health First Quarter 2025 Ernie's call in webcast. You may disconnect your line at this time and have a wonderful day.