Q2 2025 Clover Health Investments Cor Earnings Call
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Welcome to the Clover, Health second quarter 2025 earnings conference call.
At this time, all participants are in a listen-only mode.
A question and answer session will follow the prepared remarks.
at that time, if you would like to ask a question, please press star 1 on your telephone keypad,
As a reminder, today's call is being recorded.
I would now like to turn the call over to Ryan Schmidt, investor relations for Clover Health. Please go ahead.
Factors that may cause actual results to differ materially 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 information, about non-gaap financial measures reference, including a Reconciliation of those measures to gaap. Measures can be found in the earnings materials available on our website with that.
I'll now turn the call over to Andrew.
Thank you, Ryan.
Welcome everyone to our second quarter earnings call.
We are happy to report that we've delivered. Yet another impactful quarter this year, building our momentum and demonstrating our ability to achieve meaningful growth alongside sustained adjusted ibida profitability in. Medicare Advantage through the first half of the year.
To start, I feel we are executing well against our strategy. We have always aimed to position Clover to win over the long term within Medicare Advantage, and our arc has been simple: first, achieve profitability.
Then return to growth while sustaining profitability, and then leverage our differentiated model to accelerate growth and profitability together.
We exceeded our adjusted. EBA profitability Target in 2024.
Through the first half of 2025, we are executing well and believe that we are proving that we can achieve sustained, adjusted, EBA profitability amidst meaningful membership and revenue growth all during a 3 and a half star payment year.
And most importantly we expect that our performance in 2025 will position us very well to accelerate both growth and profitability in 2026 which is a 4-star payment year and where we will continue to offer our Flagship wide Network, PPO plan, While others Retreat from that offering.
Our trajectory is clear. We are confident in the path ahead and while not all Market plan data is available yet, we have reason to believe this will be another strong membership growth season for us.
Potentially even stronger than this year.
Also with next year, being a 4-star payment year, we feel we should be able to strongly grow 2026, adjusted ibitta as well.
Next, let's discuss how our second quarter highlights. Our strategic Arc and the significant value. Our technology, First Care model brings to our members
As I mentioned, we're continuing to deliver robust membership and revenue growth this year. Alongside sustained adjusted ebitda profitability in our business.
Since last quarter, our Medicare Advantage. Book has continued to increase membership and we are now projecting ending 2025 with even more members.
This is not just growth for growth's sake. We're making a real difference by bringing earlier care management via Clover, assistant technology to more and more Medicare Advantage seniors.
We're, of course, proud of our financial results so far this year, and I believe we have truly differentiated ourselves to the unmatched value. We bring to our members.
We continue to lead with physician Choice, affordability and high quality Health Care through our technology. First Care model. And we are driving real life results.
And this ultimately is driving our growth and we believe is why seniors are choosing Clover Medicare Advantage plans.
We published a clinical white paper on chronic obstructive pulmonary disease or COPD showing that a relationship with a clover. Assistant provider was correlated with 15% fewer hospitalizations and 18% fewer readmissions.
Our results are more than just numbers on a page. They're a testament to the momentum, we're building. And the effectiveness of clover assistance to make a real world impact in better managing chronic diseases.
Next, I would like to discuss broader industry, Managed Care trends.
Particularly in the context of the pressures, others are noting in the Medicaid, and ACA markets.
It's crucial to note that at Clover. Our business is Medicare Advantage. We do not run Standalone. Medicaid plans nor do we participate on the ACA exchanges.
We do serve dual eligible members. But these Medicare Advantage individuals are by definition, seniors, or are disabled. Meaning, that they are not impacted by Dynamics. Like work requirements within the construct of Medicaid, redetermination,
As such, we believe that our Medicare Advantage, focus should help insulate us from these broader industry pressures.
However, we are also seeing some of the elevated cost Trends within our ma book that others in the industry have identified.
That said, we are generally satisfied with the underlying Trends. We're observing in our portfolio.
I would note that we are keeping a particularly close watch on the impacts from the part. Dira changes this year.
Given that this is the first year of the new program. There is less of a historic Baseline to Trend against and so we anticipate more variability in our modeling of performance.
Such we are diligently monitoring this to see how it plays out through the remainder of the year.
Put another way while I think we are appropriately focused on delivering our Care Management model. We also recognize that part D remains a big Known Unknown for the second half of the year.
This is also consistent with the recently published part, the direct subsidy rate Which is materially higher for 2026 than for 2025, signaling, higher cost than expected by the industry.
The good news, is that this also gives us a reason to believe that part B. Pressure in 2025, might be alleviated in 2026.
with all that said,
Against this backdrop of General, managed care. Headwinds, we continue to believe our technology Centric Care. Delivery model, differentiates us.
Remember that our approach to managing total cost of care is fundamentally different. It's anchored on identifying and managing diseases as early as possible via Clover assistant and simultaneously, delivering, crucial, support through our clover, Care Services offering when and where our members need it most,
This unique approach allows us to potential to truly bend the cost curve over time. For our members and effectively manage Trends amidst broader industry pressures
To that end, we're extremely excited about the new health tech ecosystem initiative unveiled last week by CMS and the White House that focuses on building a truly patient-centric, interoperable ecosystem.
This initiative fostering a smarter, more secure and personalized Healthcare experience. Through enhanced interoperability and real time. Information, sharing resonates deeply with the foundational principles. We championed at Clover since day 1,
Clover, assistant is already built upon the very interoperability framework and fire standards highlighted last week, both utilizing data to generate actionable insights and contributing those insights back into the networks.
Ultimately Clover assistant and AI Technologies all scale with data. And we see this initiative as turbocharging data access which will then bring a significant accelerance to our technology approach.
Looking to 2026. We anticipate building on our successful 2025 strategy with an even sharper focus on profitable growth in our bids.
Our commitment to expanding Clover assistance, reach emphasizing retention in existing markets and bouncing new and returning member cohorts remains Central to accelerating our growth strategy.
While the competitive MA landscape will undoubtedly evolve.
Not pricing and positioning next year, during a 4-star payment year, as we've already proven, we can deliver strong ma performance during a 3 and a half star payment year in 2025.
This Step Up In Our Stars, rating provides us with an additional Financial Tailwind in 2026. And we believe that this will also position us to continue to strengthen our insurance products
We're proud of the growth and momentum. We've achieved in our results so far this year and look forward to our flywheel starting to spend much faster as we go into 2026.
Now, let's discuss our counterpart health progress and overall strategy.
Since we announced last year that we made our same CA technology platform available to other risk-bearing entities, we've seen broad interests and uptake.
Our belief is that everything in healthcare ultimately revolves around the health outcomes and total cost of care of a patient.
Involved in delivering these outcomes are a number of healthcare ecosystem, players, primary care, physicians, risk-bearing, acos pharmacies, large hospitals. And of course, Health insurers, both Regional and National
Counterpart, assistant can benefit all these third parties and the interest we've received through the deals, we've already announced shows the varied application potential of the tool both by scaling CA within our own plan and outside of it.
In particular, we are seeing a lot of resonance with plans that need assistance with star ratings, and heaters quality scores as well as managing costs within their PPO wide Networks.
Based on this, we are very excited to have pipeline deals and deployments across the healthcare ecosystem.
As a reminder, while we aren't able to announce every customer, we have announced, several large Health System deals and we're very pleased with our progress with payer partners.
Our ma plan also recently announced a pilot to use CA with independent pharmacies bringing our technology to yet. Another often overlooked site of care.
I'm excited about our progress and I believe we are well on our way to showing that counterpart assistance is capable of powering Medicare Advantage, not just in our own plan, but in any Managed Care setting Nationwide and that it's ready for prime time scale.
In summary, we are focused on achieving our goals this year and our strategically positioning the company for the future.
We're growing significantly, operating profitably and differentiating ourselves through our technology. First model
Simultaneously. We are setting the stage for an even more impactful 2026, which we believe will cement our position as a leader, in Medicare Advantage.
Now, I'll hand it over to Peter for a more detailed Financial update.
Thank you, Andrew. Before we get to the financials, I want to emphasize our strong position in today's Managed Care environment.
We are demonstrating, great, Medicare Advantage, execution, leading with a wide Network. PPO plan that currently serves 97% of our members.
We have achieved over 30% membership growth.
Which is well above the industry. All while maintaining profitability on a 3 and a half star payment year
We have outlined our year-over-year. Profitability drivers on page, 8 of the earnings tax posted to our IR website.
We are a form of being typical new member growth headwinds to the strong economics of our returning cohorts.
And while our variable and growth, sdna costs is increasing due to the strong growth.
Coupled with a strategic investments into our model. This is effectively balanced by ongoing cost efficiencies in our business. A topic. All elaborate on later.
Now, diving into the financials, our results reflect continued growth and momentum in Medicare Advantage with sustained, adjusted, evida profitability to the first half of 2025.
We've grown both membership and revenue by more than 30% year-over-year and at the same time we improved gaap. Net loss from continuing operations by 4 million to 12 million and maintained our year to date, adjusted ibida and adjusted net income, steady at 43 million, and 42 million respectively.
The first model of care, reinforce a confidence in achieving our updated full year 2025 guidance.
We believe this also positions as well for Accelerated growth and a meaningful increase in profitability in 2026 which is a 4-star payment year.
Now, let's move to a more detailed review of our second quarter financial performance drivers and our updated full year 2025 guidance.
Paul was caught in the meal test, strong with, well, above Market Insurance, revenue and membership growth.
In the second quarter of 2025, Medicare Advantage membership grew 32% year-over-year to above 106,000 members.
This growth of fueled a 34% increase in Insurance Revenue to 470 million in the second quarter and similarly, 34% growth year to date to 927 million as compared to the prior year period.
And as our strategic growth flywheel continues to spin. We're generally satisfied with the underlying Trends were observing in our portfolio.
While we are seeing some of the elevated, Medicare Advantage cost trends, that others in the industry have identified.
We remain confident in our ability to manage our book.
Both new and returning. Member core performance has been strong.
Which we attribute to our differentiated Tech first model of care to manage part C, cost Trends and identify diseases as early as possible.
Sets due in the second quarter, we observed some elevated pockets of utilization within supplemental benefits as well as elevated Part B. Utilization from Ira impacts.
Well, this did negatively impact our results. We have implemented different initiatives to monitor manage these developments going forward.
As such we slightly increase our full year 2025 Insurance, ber, guidance to reflect these developments, which I will discuss in more detail later.
As it relates to the elevator utilization levels. We're seeing Within part D. And as Andrew mentioned, we're keeping a close eye on the impacts from the first year of the IRA changes. And we will continue to diligently monitor any evolving trends that we're seeing here.
Moving to sdna.
We continue to drive operating leverage and efficiencies in our business amidst, a strong growth.
Adjusted sdna as a percentage of total revenues improved to 17% this quarter.
A 280 basis. Point Improvement year-over-year.
Is demonstrates our ability to gain operating leverage amidst, increased variable and growth as DNA pass necessary to support a strong new membership growth this year.
More importantly, our result is net of our continued strategic investments. Focus on Starz.
Quality initiatives further, improving our home care and clover assistant platform capabilities and further accelerating the reach of CA in IMA plan as well as in our counterpart, Health offering.
All while leveraging technology and AI to gain further efficiencies in our sdna.
Our Focus remains on discipline.
Strategic Investments to create lasting value for our members.
More importantly, we have sustained our adjusted ibida profitability profile in tandem with our strong growth, to the first half of this year.
Gap. Net loss was $11 million. This quarter bringing year to date gaap, net loss to 12 million, and this represents an improvement year to date of million dollars compared to the same period last year.
During the second quarter. In 10 number that continued, strong membership and revenue growth. We delivered 70 million in adjusted evida and 70 million of adjusted net income.
For the year today, period adjusted ebit. I reached 43 million and adjusted net income is 42 million. Both remaining steady year-over-year. Amidst, 32% membership growth.
This underscores, the strength of our differentiated growth model.
Sounds Insurance operations and solid cohort management.
Ber of 88.4%.
compared to 76.1% in the second quarter of 2024 bringing our year to date Insurance, ber to 87.3%
And developing in line with our updated guidance, for the full year of 2025.
As you may recall last year during the second quarter of 2024, we experienced heightened private period development that screws. The year-over-year comparisons
The year-over-year increase in Insurance B also includes the continued impact of our CA enabled, affiliate entity focused on improving care coordination and health outcomes for our New Jersey, Plan and members, we continue to push forward with this initiative 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.
Lastly, days and claims payable of 32 days as of June 30, 2025.
Representing a decrease of 5 days sequentially.
This represents continued normalization of our claims inventory from early. Last year, when we experienced an increase in claims backlog, as a result of the industry-wide change Healthcare incident, that occurred simultaneously with our back office business processing as a service and may ecosystem transition.
In an effort to normalize our claims inventory. Since last year, we have accelerated, our timeliness of claims payments. We believe that we have now adequately normalized, the claims inventory and that our DCP is within expected, go forward ranges.
Moving on to the balance sheet. We ended the second quarter with cash cash equivalents and Investments to link 389 million on a Consolidated basis.
With 146 million at the unregulated. Subsidiary level.
View in the second quarter of 2025 cash flow from operating activities was 5 million dollars basically impacted by our results. This quarter bringing our year-to-date cash flow used and offer operating activities to 11 million.
We expect that our cash balance as will remain strong for the remainder of 2025, which will allow us to continue to operate from a position of strength.
as we invest in our growth model in 2026 and Beyond,
Finally, we have maintained a full year 2025, adjusted, net income and adjusted evida profitability guidance.
Underscoring, our continued business execution.
Strong intra-year membership growth and the power of a differentiated model of care.
And while our overall Outlook remains on systems, we are providing the following guidance updates to reflect the latest developments in our business.
We are increasing our Medicare Advantage membership guidance. To now averaged between 104,000 and 108,000 members reflecting, 32% membership growth year-over-year at the midpoint and continued intra-year growth this year.
We are reconfirming our insurance revenue of between 1 billion, and 800 million, and 1 billion, and 875 million.
Reflecting year of your growth of 37% at the midpoint of the range.
We are improving our adjusted sdna guidance.
To be between 335 million and 345 million.
This represents adjusted sdna as the percentage of total revenue of 18 to 19%.
And is an approximate 300 basis. Point to decrease or Improvement year-over-year as the midpoint of the range.
This reflects our continued ability to gain operating leverage in our business as we grow.
For the full year 2025 we are maintaining both adjusted evida and adjusted net income. Guidance of between 50 million and 70 million.
Lastly, we're updating our insurance BR guidance to a range of 88.5% to 89.5% this incorporates the underlying Trends. We've observed this quarter in part D and supplemental benefits discussed earlier.
and notably the impact of our ma membership growth outperformance so far this year,
The care model is viewed as incremental membership growth, which positively strengthens our conviction for 2026 and beyond. New members will mature into returning members in the future.
And lastly, we continue to expect typical Revenue medical costs seasonality during the second half of the year with customary LFA the utilization. Particularly during the fourth quarter that said this is simply normal Medical Advantage seasonality
We remain confident in a unique care model and are focused on empowering tcps with technology, to identify and manage chronic diseases as early as possible to effectively manage costs amidst broader industry pressures.
In summary, we're executing well on a strategy this year.
Achieving strong Medical Advantage performance with above market growth and sustained adjusted. Evida profitability here today
Which we believe firmly positions us for continued success in 2026 and beyond.
We remain confident in our trajectory for the following reasons.
First, that's Andrew mentioned earlier, we're calling from within the growth path ahead. And while not all Market plan data is available yet. We have reason to believe that this will be another strong membership growth season for us.
Our underlying financial performance allows us to continue to invest in quality and affordability for our members. Fueling our growth flywheel as well as continued, the Investments to expand the reach of clover systems to better manage new and returning member cohorts.
Second, we're continuing to prioritize returning member retention in our 2026 bit strategy.
We expect the unit economics of a large core of new members, added in 2025, to significantly improve into 2026 as returning members.
and we also expect a continued favorable impact from further improvements in our year 3 plus returning member cohorts
In 2026, we will increase to a 4-star payment year for our PPO plans, which will bring a financial tailwind that will favorably impact our results. Currently, 97% of our members are enrolled in a wide Network PPO plan.
Forth. The expected compounding. Favorable, impact from the CMS. Final rate, notice announced earlier this year that affect the broader industry,
Although this is particularly additive to Clover, given that we're moving from a 3.5-star payment year in 2025 to a 4-star rating for payment year 2026.
Lastly.
We believe that there will be an incremental impact for my efforts to gain operating leverage. The initiative to optimize variable fixed and growth. FTA costs.
By leveraging this year's momentum and targeted investments in our care platform. We believe that we are strategically positioned.
To meaningfully, increase profitability.
Thrive strong growth and truly unlock Clover Health's full potential in 2026 and Beyond.
Now, I'll turn the call back to Andrew for closing comments.
Thanks Peter.
In conclusion, we have delivered significant growth this quarter amidst sustained adjusted EBIT profitability, clearly executing our strategy.
Our differentiated Tech First Care. Model is consistently delivering value for members. And enabling us to effectively manage costs and drive our strong performance.
We remain confident in our full year 2025 performance. And we believe we are strategically positioned for Accelerated growth and sustained. Profitability unlocking Clover's full potential in the future.
With that, let's open it up for questions.
Thank you. We will now be taking questions from Clover's research analysts.
At this time, if you would like to ask a question, please press star 1 on your telephone keypad.
you may remove yourself from the queue, by pressing star 2.
In the interest of time, we ask that you please let yourself to 1 question and 1 quick, follow-up.
We will now take our first question from Jonathan Young with UBS.
Hey, thank you. A question here.
You know how much, um, how much conservatism do you kind of have embedded in there and how much visibility do you have into how that Trend will develop in the back half of the year?
Yeah, thanks Jonathan to, for the question. So the, the increase in the be guides for the full year is mostly related to, uh, Part D and supplemental, mostly actually Dental. Uh, so that's a positive for uh, for the members, we have initiatives in place to monitor this go forward, um and I believe there's some relief as well on the part D pressure uh from the IRA as we go into 2026.
Okay. And then, you know, within the context of what you saw, you know, when did, when did this crash was kind of start emerging? Was it in the earlier, part of the core later, part of the quarter? And then how much of this did you actually capture within the context of your bids for next year? Um, just given, you know, it, it does seem like a fairly sizable step up here.
Yeah, I think that, um, as I mentioned in my commentary, this is Andrew. Um, the part especially on the part, D side and 1 Thing, 1 Thing, we've been tracking as we go through the year is that this is the first year of the IRA. So tracking against the model uh if you something that's new across the industry I think so we did look at that. Excuse me when we were practicing into the bid I think you can see that. I think a lot of people in the industry did that as well as reflected by the fact of the variability and increase in the part D, direct subsidy that can
Came in for 2026. So I do think that across the industry that higher Part D, uh, costs are being factored in as we start to look and rationalize that trend from earlier this year into our sort of like Baseline models.
We'll go next to Matt Huitt with Craig-Hallum Capital Group.
Good afternoon. Thanks for taking the questions. Maybe first up, you, you you've increased or showing Improvement in your sgna or adjusted sgna. And I'm just curious, what are the the the drivers for those improvements? Um are you kind of holding back on some of the hiring or you know, are you finding some new efficiencies within the model? Any color there will be helpful.
Yeah, man, thanks for the question. Yeah. So mostly cost efficiencies, we started a companywide uh, cost initiative uh, to really rationalize uh, the price of volume terms, we get uh, with most of our partnership contracts. Now that we are growing, um, well above the industry, and we're estimating the same growth also to remain, uh, for the next couple of years. So refer we are inferior attractive partner. Uh, so a lot of that also comes from term, renegotiations with partners.
Got it, and then maybe kind of a a separate question here, but in respond. What kind of response have you been getting from the COPD white paper? Is that something that you can replicate, are there other similar types of papers that you can publish that kind of highlight the benefits of using CA and, and kind of driving incremental business?
Yeah, definitely. We're very proud of these papers that we're putting out. We obviously, COPD just came out, we had CHF come out, maybe about a month. I think, or 2 a go, our Flagship paper on CKD, came out, I think last year or the year before. Um, we plan to keep producing this material and we think that Clover assistant uses definitely in our data shown to be that. As we can see in the white paper is correlated with better earlier, diagnosis management care, total cost of care. Uh you can see that in our uh, you know, our our heated scores which which remain um 1 of the top in the country. There's a lot of these data points which we're very, very proud of and ALS flows into how we're talking about the offering in the counterparts context as well where we point to these results that are being driven by our technology with our own plan. And it's something that we can bring to other plans uh in other markets.
Excellent, thank you.
Yeah, of course.
Once again, if you would like to ask a question, please press star 1 on your telephone keypad now.
we'll go next to John penny with canaccord, genuity
Hi for Richard close. Thanks for the questions. Um yeah so going back to the beer is the elevated cost Trend you're seeing like on a more localized in that like on a newer cohort or there's a pretty broad broad base. Is there any differences in geography? There is a again pretty broad base.
So returning members are definitely improving from an MCR and B perspective, as expected.
uh, that
Our previous commentary, as we model out part, especially the part, the side of things which was in my section. Uh this is the first year we are still figuring out what the Baseline models. Look like that, direct subsidy will increase going to 26. So as Peter mentioned, like, I think there's reason to believe that, you know, any precious we see there will be appropriately priced in industrywide going into next year as well, and we are also, uh, you know, making sure that we keep an eye on uh, supplemental benefits throughout the year.
Okay, great thanks. Um, and then also just the touch on like the competitive landscape and the upcoming a is there.
Is there anything different that you'd call out on how your competitors are approaching this year going into 2026? Are they, you know, maybe pulling back a little bit less than I did last year? Is there anything you would call out on any differences in the competitive landscape compared to last year?
Yeah, for sure. I think that obviously, uh, we noting that cost trends, like within Managed Care in General, within even Medicare Advantage. There's been a lot of motion this year, but by the, by the national players, the way that we see it is that the products that they're most pulling back while all of them pretty much are pulling back to some extent where they're pulling back counts and where they're pulling back is generally within that PPO
Wider Network where they struggle to, uh, deploy their existing Managed Care capabilities. And I think that's an area where we are very strong based based upon our technology from the counterpart side. So we feel good in our core markets. We feel that uh, if that people are pulling back, they're quite likely to pull back within those same markets because those are challenging for the same reasons that they're good for us. So that's why within our commentary, we said that while we don't have all the data yet, we feel like we're likely to, um, be very well placed into this coming growth season.
And I would add to that as well uh to point out again. Next year, 2026 is a 4-star payment year so that's also a financial aid with allowing us to grow.
All right, great. Thank you.
And a final reminder was star 1. If you would like to ask a question,
And that 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.
Fantastic. Uh, I want to thank everybody for joining us today. Thank you for taking the time and for your questions. Uh, truly value, everyone's interest in Clover, health. And we'll be speaking with everyone again soon. Uh, thanks again and enjoy the rest of your evening.
Thank you. This concludes today's Clover Health second quarter 2025 earnings call and webcast.
You may disconnect your line at this time. Have a wonderful day.