Clover Health (Nasdaq: CLOV) (“Clover” or the “Company”), an
innovative technology company improving health outcomes for
America's seniors, today reported financial results for the first
quarter of 2021. Management will host a conference call today at
8:30 a.m. ET to discuss its operating results and other business
highlights.
“Clover’s mission is to use our technology platform to improve
every life, and every day that passes brings us one step closer to
that goal. I am excited that we have reached our strategic
milestone of moving beyond Medicare Advantage into the largest
segment of Medicare - Original Medicare - by launching Direct
Contracting. This has led to our lives under management nearly
doubling to over 130,000 Americans,” said Clover Health CEO Vivek
Garipalli. “We’re also proud of the progress we’re making on
providing high-quality care to members disproportionately affected
by social risk factors and the preliminary evidence showing our
plan’s strong performance on a prototype of the Medicare Advantage
(MA) Health Equity Summary Score (HESS), which we plan to
discuss further in a white paper summarizing our efforts around
Health Equity.”
Andrew Toy, President and CTO of Clover Health added, “Adoption
and iteration of the Clover Assistant is critical to our mission to
improve every life, and it directly ties back to our financials,
supporting the positive alignment between our business and the
health of our members. Strategically, growing lives under
management through Direct Contracting feeds our virtuous cycle: we
believe that as more physicians use the Clover Assistant, the
software will get smarter and outcomes will improve, which will
then reduce the cost of care. We are also excited about the way we
are integrating data from our platform into our work with Walgreens
- Walgreens Health advisors will now be able to offer enhanced,
personalized services to Clover members based on Clover Assistant
data. The Walgreens partnership is off to a great start. Currently,
over 30 Health Corners are open to Clover members, and almost 50%
of our New Jersey members live within 1 mile of a Walgreens Health
Corner where they can receive personalized care based on Clover
Assistant data. Since we began a trial of the program in the second
half of 2020, over 1,100 care gaps have been closed.”
Management Commentary on Financial
Highlights
Clover Health’s CFO, Joe Wagner, commented, “In the first
quarter we delivered a record-setting $200 million in revenue,
which was quickly followed by the launch of our Direct Contracting
Entity. Notably, the Clover Assistant continues to power improved
financial outcomes, demonstrated by a MCR differential of more than
1,000 basis points in the first quarter for returning members who
see a PCP that uses the Clover Assistant versus the MCR of those
who don’t. This past quarter, the positive traction we saw across
our business was partially offset by elevated COVID-related costs.
While we expect to continue to experience heightened levels of
utilization in the near-term, we couldn’t be more excited about the
long-term potential to drive strong outcomes for both our members
and investors.”
Key Company highlights are as follows (1):
Dollars in Millions |
|
Q1’21 |
|
Q1’20 |
Total Revenue |
|
$200.3 |
|
$165.5 |
GAAP Medical Care
Ratio ("MCR") |
|
107.6% |
|
89.4% |
Normalized MCR
(Non-GAAP) (2) |
|
95.4% |
|
N/A |
Salaries and benefits
plus General and administrative expenses |
|
$104.6 |
|
$50.0 |
Adjusted Operating
Expenses (Non-GAAP) (2) |
|
$61.9 |
|
$48.0 |
Net Loss |
|
$(48.4) |
|
$(28.2) |
Adjusted EBITDA
(Non-GAAP) (2) |
|
$(76.2) |
|
$(21.7) |
Normalized Adjusted
EBITDA (Non-GAAP) (2) |
|
$(52.1) |
|
N/A |
(1) A “Budgeted MCR” metric was included in our Full Year 2020
Earnings Release as a one-time disclosure to help explain the
Company’s expectations for financial results prior to the COVID-19
pandemic, and is no longer being disclosed.
(2) Reconciliations of Normalized MCR (Non-GAAP) to GAAP MCR,
Adjusted Operating Expenses (Non-GAAP) to the sum of Salaries and
benefits plus General and administrative expenses, Adjusted EBITDA
(Non-GAAP) to Net Income (Loss), and Normalized Adjusted EBITDA
(Non-GAAP) to Net Income (Loss), respectively, are provided in the
tables immediately following the consolidated financial statements
below. Additional information about the Company's non-GAAP
financial measures can be found under the caption “About Non-GAAP
Financial Measures” below and in Appendix A.
First Quarter 2021 Financial Highlights
- Medicare Advantage membership was approximately 66,300 as of
March 31, 2021, an 18% increase from March 31, 2020.
- Total revenue was $200.3 million in the first quarter of 2021,
a 21% increase compared to $165.5 million in the first quarter of
2020. This growth was primarily due to an increase in
membership.
- Our consolidated GAAP MCR for the quarter was 107.6%, compared
to 89.4% for Q1 2020. Normalized MCR (Non-GAAP), which excludes the
estimated net effect of COVID-19 and any changes to our estimate of
prior period revenue and medical costs, was 95.4%. The
year-over-year increase in GAAP MCR was primarily driven by an
increase in costs associated with caring for members impacted by
COVID-19.
- Salaries and benefits plus General and administrative
expenses for the quarter were $104.6 million compared to $50.0
million for the first quarter of 2020, an increase of $54.6
million. This increase was related primarily to an increase in
non-cash stock-based compensation expense related to stock awards
that were issued to certain executives in connection with the
Company's merger with Social Capital Hedosophia Holdings Corp. III
on January 7, 2021 (the "Merger").
- GAAP net loss for the quarter was $(48.4) million compared to
$(28.2) million for the first quarter of 2020. Our first quarter
2021 results were impacted by the application of updated guidance
from the SEC related to our accounting for public and private
placement warrants assumed by the Company in connection with the
Merger. Applying the updated guidance, we recognized a gain of
$85.5 million in the first quarter related to the change in fair
value of the warrant liability.
- Adjusted EBITDA loss (Non-GAAP) for the quarter was $(76.2)
million compared to $(21.7) million in the first quarter of 2020.
Normalized Adjusted EBITDA loss (Non-GAAP), which excludes the net
impact of the COVID-19 pandemic and any changes to our estimate of
prior period revenue and medical costs, was $(52.1) million.
- Cash, cash equivalents and investments totaled $720.1 million
as of March 31, 2021. The Merger delivered approximately $670
million to the Company’s balance sheet, net of deal-related
expenses.
Financial Outlook (1)
For full year 2021, Clover Health is providing the following
guidance and commentary:
- Medicare Advantage membership is expected to be in the range of
68,000 - 70,000 by December 31, 2021, a growth rate of 17% - 21% as
compared to year end 2020. This is consistent with our previous
guidance that we discussed in our year-end 2020 earnings call on
March 1.
- For the Medicare Direct Contracting program, while the Company
expects to have access to up to 200,000 Medicare beneficiaries
through its contracts with Participating Providers, we believe we
will end 2021 with between 70,000 - 100,000 total aligned
beneficiaries. Voluntary alignment will occur quarterly, and the
majority of voluntary alignments are expected to become effective
in the fourth quarter.
- Total revenues are expected to be in the range of $810 - $830
million, inclusive of a preliminary estimate of approximately $20 -
$30 million of revenue generated from Direct Contracting. GAAP
revenue estimates for Direct Contracting are dependent on the
finalization of accounting treatment, which we expect will be
completed by the end of the second quarter of 2021.
- CMS benchmark expenditures (2) under management for Direct
Contracting are expected to be in the range of $700 - $800
million.
- Total Medicare spend under management, which includes revenues
from the Medicare Advantage program plus the estimated CMS
benchmark expenditures for Direct Contracting, is expected to be in
the range of $1.5 - $1.6 billion.
- Normalized MCR (Non-GAAP) (3) for Medicare Advantage is
expected to be in the range of 94% - 97%.
- MCR for Direct Contracting is expected to be approximately
100%, net of savings targets required by the Centers for Medicare
& Medicaid Services (“CMS”).
- Adjusted Operating Expenses (Non-GAAP) (3), which we
define as Salaries and benefits plus General and administrative
expenses less stock-based compensation expense, is expected to be
between $250 and $270 million, reflecting the use of a portion of
the proceeds from the Merger to make investments in marketing,
network expansion and technology to support future growth.
- Normalized Adjusted EBITDA loss (Non-GAAP) (3) is expected to
be in the range of $(240) - $(190) million.
- The Company previously expected an accounting adjustment
related to the valuation of the embedded derivative features of its
convertible securities to result in a positive non-cash income
statement impact in its first quarter and full year 2021 financial
results. In the course of performing its closing procedures for the
first quarter, the Company determined that it would not in fact
have this positive income statement impact.
(1) Due to the difficulty in projecting several components
of net income (loss), including the quarter-over-quarter change in
the fair value of our warrant liability, we believe it is prudent
to no longer provide guidance on net income (loss) and net income
(loss) per share.
(2) See Appendix A for definition.
(3) A reconciliation of projected Adjusted Operating Expenses
(Non-GAAP) to projected Salaries and benefits plus General and
administrative expenses is not provided because stock-based
compensation expense, which is excluded from Adjusted Operating
Expenses (Non-GAAP), cannot be reasonably calculated or predicted
at this time without unreasonable efforts. A reconciliation of
projected Normalized MCR (Non-GAAP) to GAAP MCR is not provided
because COVID-related costs, which are excluded from Normalized MCR
(Non-GAAP), cannot be reasonably calculated or predicted at this
time without unreasonable efforts. A reconciliation of projected
Normalized Adjusted EBITDA (Non-GAAP) to net loss is not provided
because certain items that are excluded from Normalized Adjusted
EBITDA (Non-GAAP), including changes in the fair value of the
Company’s warrant liability, stock-based compensation expense, and
COVID-related costs, cannot be reasonably calculated or predicted
at this time without unreasonable efforts. Additional information
about the Company's non-GAAP financial measures can be found under
the caption “About Non-GAAP Financial Measures” below and in
Appendix A.
Earnings Conference Call Details
Clover Health’s management will host a conference call to
discuss its financial results on Monday, May 17, at 8:30 AM Eastern
Time. A live webcast of the call can be accessed from Clover
Health’s Investor Relations website at investors.cloverhealth.com,
and an on-demand replay will be available on the same website
following the call.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements include statements regarding
future events and Clover Health’s future results of operations,
financial position, market size and opportunity, business strategy
and plans, and the factors affecting our performance and our
objectives for future operations. In some cases, you can identify
forward looking statements because they contain words such as
“may,” “will,” “should,” “expects,” “plans,” “anticipates,” “going
to,” “can,” “could,” “should,” “would,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential,” “outlook,” “forecast,” “objective,” “plan,” “seek,”
“grow,” “target,” “if,” “continue” or the negative of these words
or other similar terms or expressions that concern Clover Health’s
expectations, strategy, priorities, plans or intentions.
Forward-looking statements in this release include, but are not
limited to, statements under “Financial Outlook,” including
expectations relating to Medicare Advantage membership growth,
Direct Contracting beneficiaries growth, revenue growth, Normalized
MCR (Non-GAAP), Adjusted Operating Expenses (Non-GAAP), Normalized
Adjusted EBITDA Loss (Non-GAAP), and the statements contained in
the quotations, including expectations related to Clover Health’s
ability to scale its platform, growth strategies and ability to
reduce the cost of care. These statements are subject to known and
unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance or achievements to
differ materially from results expressed or implied in this press
release. Such risk factors include, but are not limited to, those
related to: Clover Health’s ability to increase the lifetime value
of enrollments and manage medical expenses; changes in CMS’s risk
adjustment payment system; challenges in expanding our member base
or into new markets; Clover Health’s exposure to unfavorable
changes in local benefit costs, reimbursement rates, competition
and economic conditions; the impact of litigation or
investigations; changes or developments in Medicare or the health
insurance system and laws and regulations governing the health
insurance markets; the current and future impact of the COVID-19
pandemic on Clover Health’s business and industry; the timing and
market acceptance of new releases and upgrades to the Clover
Assistant; and the successful development of Direct Contracting and
the degree to which our offerings gain market acceptance by
physicians. Additional information concerning these and other risk
factors is contained in the Risk Factors section of our Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 2021. Clover Health assumes no obligation,
and does not intend, to update these forward-looking statements as
a result of future events or developments.
About Non-GAAP Financial Measures
We use non-GAAP measures including Normalized MCR, Adjusted
Operating Expenses, Adjusted EBITDA, and Normalized Adjusted
EBITDA. These non-GAAP financial measures are provided to enhance
the reader’s understanding of Clover Health’s past financial
performance and our prospects for the future. Clover Health’s
management team uses these non-GAAP financial measures in assessing
Clover Health’s performance, as well as in planning and forecasting
future periods. These non-GAAP financial measures are not computed
according to GAAP, and the methods we use to compute them may
differ from the methods used by other companies. Non-GAAP financial
measures are supplemental, should not be considered a substitute
for financial information presented in accordance with GAAP and
should be read only in conjunction with our consolidated financial
statements prepared in accordance with GAAP. Readers are encouraged
to review the reconciliations of these non-GAAP financial measures
to the comparable GAAP measures, which are attached to our
quarterly earnings release and which can be found, along with other
financial information including our filings with the Securities and
Exchange Commission, on the Investor Relations page of our website
at investors.cloverhealth.com.
For a description of these non-GAAP financial measures,
including the reasons management uses each measure, please see
Appendix A: "Explanation of Non-GAAP Financial Measures and Other
Items."
About Clover Health
Clover Health (Nasdaq: CLOV) is a healthcare technology company
with a deeply rooted mission of improving every life. Clover uses
its proprietary technology platform to collect, structure, and
analyze health and behavioral data to help improve medical outcomes
and lower costs for patients. As a company whose business goals
align with PCPs by improving health outcomes for our members and
beneficiaries. We build trust by proactively identifying at-risk
individuals and teaming up with physicians to accelerate care
coordination and simultaneously improve health outcomes and reduce
avoidable costs. Clover has offices in Nashville, San Francisco,
Jersey City and Hong Kong.
Contacts:
Investor Relations:Derrick Nuemaninvestors@cloverhealth.com
Press Contact:Andrew Still-Baxterpress@cloverhealth.com
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS: SELECTED METRICS(in
thousands) (Unaudited)
|
|
As
of |
|
|
March 31, |
|
December 31, |
|
|
2021 |
|
2020 |
Selected Balance Sheet Data: |
|
|
|
|
Cash, cash
equivalents and investments |
|
$ |
720,067 |
|
|
$ |
151,103 |
|
Total assets |
|
|
866,942 |
|
|
|
267,252 |
|
Unpaid claims |
|
|
117,582 |
|
|
|
103,976 |
|
Notes and securities payable, net of discount and deferred
issuance costs |
|
|
24,285 |
|
|
|
106,413 |
|
Warrants payable |
|
|
62,039 |
|
|
|
97,782 |
|
Total liabilities |
|
|
278,007 |
|
|
|
432,698 |
|
Convertible Preferred stock |
|
|
- |
|
|
|
447,747 |
|
Total stockholders’ equity (deficit) |
|
|
588,935 |
|
|
|
(613,193 |
|
|
|
|
|
|
|
|
|
|
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands)
(Unaudited)
|
|
Three Months
Ended March 31, |
|
|
|
2021 |
|
|
2020 |
|
Revenues: |
|
|
|
|
|
|
Premiums earned, net (Net of ceded premiums of $124 and $129 for
the three months ended March 31, 2021 and 2020, respectively) |
|
$ |
199,376 |
|
|
$ |
163,710 |
|
Other income (1) |
|
|
949 |
|
|
|
1,795 |
|
Total revenues |
|
|
200,325 |
|
|
|
165,505 |
|
Expenses: |
|
|
|
|
|
|
Net medical claims incurred |
|
|
214,432 |
|
|
|
146,328 |
|
Salaries and benefits |
|
|
66,024 |
|
|
|
21,484 |
|
General and administrative expenses |
|
|
38,606 |
|
|
|
28,483 |
|
Premium deficiency reserve benefit |
|
|
- |
|
|
|
(4,282 |
) |
Depreciation and amortization |
|
|
160 |
|
|
|
122 |
|
Other expense |
|
|
191 |
|
|
|
- |
|
Total expenses |
|
|
319,413 |
|
|
|
192,135 |
|
Loss from operations |
|
|
(119,088 |
) |
|
|
(26,630 |
) |
|
|
|
|
|
|
|
Change in fair value of warrants payable |
|
|
(85,506 |
) |
|
|
2,237 |
|
Interest expense |
|
|
1,175 |
|
|
|
7,815 |
|
Amortization of notes and securities discount |
|
|
13,660 |
|
|
|
5,712 |
|
Gain on derivative |
|
|
- |
|
|
|
(14,232 |
) |
Net loss |
|
$ |
(48,417 |
) |
|
$ |
(28,162 |
) |
(1) In first quarter 2021, other income and investment income,
net, were combined into a single line item for other income. Prior
period balances have been revised to conform to the current period
presentation.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED
EBITDA AND NORMALIZED ADJUSTED EBITDA RECONCILIATION(in thousands)
(Unaudited) (1)
|
|
Three Months
Ended March
31, |
|
|
|
2021 |
|
|
2020 |
|
Net
loss: |
|
$ |
(48,417 |
) |
|
$ |
(28,162 |
) |
Adjustments |
|
|
|
|
|
|
Interest expense |
|
|
1,175 |
|
|
|
7,815 |
|
Amortization of notes and securities discounts |
|
|
13,660 |
|
|
|
5,712 |
|
Income taxes |
|
|
- |
|
|
|
- |
|
Depreciation and amortization |
|
|
160 |
|
|
|
122 |
|
Change in fair value of warrants payable |
|
|
(85,506 |
) |
|
|
2,237 |
|
Gain on derivative |
|
|
- |
|
|
|
(14,232 |
) |
Restructuring cost |
|
|
- |
|
|
|
577 |
|
Stock-based compensation expense |
|
|
42,713 |
|
|
|
1,977 |
|
Health insurance industry fee |
|
|
- |
|
|
|
2,251 |
|
Adjusted EBITDA |
|
$ |
(76,215 |
) |
|
$ |
(21,703 |
) |
Normalization adjustments |
|
|
|
|
|
|
Direct COVID costs, including utilization deferred in prior
periods, and estimate of care deferred/eliminated by COVID
environment |
|
$ |
16,982 |
|
|
$ |
- |
|
Prior period development and other |
|
|
7,167 |
|
|
|
- |
|
Normalized adjusted EBITDA |
|
$ |
(52,066 |
) |
|
NM |
|
NM - Not Meaningful
(1) This section includes non-GAAP measures. Non-GAAP financial
measures are supplemental and should not be considered a substitute
for financial information presented in accordance with
GAAP. For a detailed explanation of these non-GAAP measures,
see Appendix A.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESNORMALIZED
MCR (NON-GAAP) RECONCILIATION(Unaudited) (1)
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
GAAP
MCR: |
|
|
107.6 |
% |
Adjustments |
|
|
|
Direct COVID costs, including utilization deferred in prior
periods, and estimate of care deferred/eliminated by COVID
environment |
|
|
(8.5 |
%) |
Prior period development and other |
|
|
(3.7 |
%) |
Normalized MCR (Non-GAAP) |
|
|
95.4 |
% |
(1) This section includes non-GAAP measures. Non-GAAP financial
measures are supplemental and should not be considered a substitute
for financial information presented in accordance with
GAAP. For a detailed explanation of these non-GAAP measures,
see Appendix A.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED
OPERATING EXPENSES (NON-GAAP) RECONCILIATION(Unaudited) (1)
|
|
Three Months
Ended March
31, |
|
|
|
2021 |
|
|
2020 |
|
Salaries and benefits |
|
$ |
66,024 |
|
|
$ |
21,484 |
|
General and administrative expenses |
|
|
38,606 |
|
|
|
28,483 |
|
Total Salaries and benefits plus General and administrative
expenses |
|
|
104,630 |
|
|
|
49,967 |
|
Adjustments |
|
|
|
|
|
|
Stock-based compensation expense |
|
|
(42,713 |
) |
|
|
(1,977 |
) |
Adjusted Operating Expenses |
|
$ |
61,917 |
|
|
$ |
47,990 |
|
(1) This section includes non-GAAP measures. Non-GAAP financial
measures are supplemental and should not be considered a substitute
for financial information presented in accordance with GAAP.
For a detailed explanation of these non-GAAP measures, see Appendix
A.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESAppendix AExplanation of Non-GAAP Financial Measures
and Other Items
Non-GAAP AdjustmentsWe believe it
is useful to investors for our presentation within this document on
a non-GAAP basis to exclude the below items. In particular, we
believe that the exclusion of these amounts provides useful
measures for period-to-period comparisons of our business. These
key measures are used by our management and the board of directors
to understand and evaluate our operating performance and trends, to
prepare and approve our annual budget and to develop short and
long-term operating plans.
Amortization of notes and securities discount - We report
non-convertible notes and convertible securities at carrying value,
net of discount. We account for convertible securities in
accordance with accounting guidance for debt with conversion and
other options, after determining whether embedded conversion
options should be bifurcated from their host instruments.
Change in fair value of warrant expense - The fair value of
warrant liabilities is estimated using a valuation method based on
the level of instrument, where the values of various instruments
are estimated based on an analysis of future values, assuming
various future outcomes.
Direct COVID costs, including utilization deferred in prior
periods, and estimate of care deferred/eliminated by COVID
environment - Direct COVID costs consist of our estimate of
costs of care associated with COVID-19 related diagnoses and
testing. Utilization deferred in prior periods consists of our
estimate of non-COVID related medical costs which were deferred in
prior periods by members in observance of stay at home orders and
other social distancing safety concerns, which ultimately were
incurred in the current period through necessity or perceived
improvement of the general safety environment. Estimate of care
deferred/eliminated by COVID environment consists of our estimate
of care that was deferred or eliminated due to the COVID-19
pandemic, including the impact of reduced demand for medical
services. These medical costs have the potential to be incurred in
future periods. See definition of Normalized MCR (Non-GAAP).
(Gain) loss on derivatives - This consists of values determined
after we have evaluated the embedded features of our convertible
securities by applying derivative accounting guidance. Derivatives
embedded within non-derivative instruments, such as convertible
securities, are bifurcated from the host instrument when the
embedded derivative is not clearly and closely related to the host
instrument.
Health insurance industry fee (“HIF”) - The Affordable Care Act
imposed an annual fee on covered entities engaged in the business
of providing health insurance. The HIF is a fixed amount allocated
among all covered entities in proportion to their relative market
share as determined by each entity’s net premiums written for the
data year. The data year is the year immediately preceding the year
in which the fee is paid.
Prior period development and other - This consists of our
estimate of adjustments in the current period which relate to prior
period dates of service. We exclude these amounts to isolate our
best estimate of current period performance.
Restructuring (income) cost - Restructuring costs primarily
consist of one time costs related to the reorganization of
operations.
Stock Based Compensation Expense - This
consists of expenses for stock-based payment awards granted to
employees and non-employees.
Non-GAAP Definitions
Adjusted EBITDA - A non-GAAP financial measure defined by us as
net loss before interest expense, amortization of notes and
securities discounts, provision for income taxes, depreciation and
amortization expense, change in fair value of warrants expense,
(gain) loss on derivatives, health insurance industry fee,
restructuring (income) cost and stock-based compensation expense.
Adjusted EBITDA is a key measure used by our management and the
board of directors to understand and evaluate our operating
performance and trends, to prepare and approve our annual budget
and to develop short and long-term operating plans. In particular,
we believe that the exclusion of the amounts eliminated in
calculating Adjusted EBITDA can provide useful measures for
period-to-period comparisons of our business. Accordingly, we
believe that Adjusted EBITDA provides investors and others useful
information to understand and evaluate our operating results in the
same manner as our management and our board of directors.
Adjusted Operating Expenses - A non-GAAP financial measure
defined by us as Salaries and benefits plus General and
administrative expenses less stock-based compensation expense. We
believe that Adjusted Operating Expenses provides investors and
others a useful view of our operating spend as it excludes
non-cash, stock-based compensation.
Normalized Adjusted EBITDA - A non-GAAP financial measure
defined by us as net loss before interest expense, amortization of
notes and securities discounts, provision for income taxes,
depreciation and amortization expense, change in fair value of
warrants expense, (gain) loss on derivatives, health insurance
industry fee, restructuring (income) cost, stock-based compensation
expense, the impact of COVID-related medical costs and adjustments
for the estimate of prior period divergence from estimates. We
believe that Normalized Adjusted EBITDA is a helpful measure for
our management team, investors and others to assess the Company’s
financial performance and operations without the temporary
distortion caused by the COVID pandemic.
Normalized MCR - A non-GAAP financial measure that excludes from
MCR (as defined below) the impact of COVID-19-related medical costs
and adjusts for the estimate of prior period divergence from
estimates. The impact of such medical costs consists of estimates
of eliminated or deferred care, reduced demand for medical
services, and the direct cost of COVID-related care. Normalized MCR
(Non-GAAP) should be considered a supplement to, and not a
substitute for, GAAP MCR. We believe that this metric, which is
used by our management in the operation of the business, is helpful
to investors and others in assessing the Company’s financial
performance and operations without the temporary distortion caused
by the COVID pandemic.
Definitions of Other Items
Lives under Management - Consists of our Medicare Advantage
members and Original Medicare beneficiaries aligned with the
Company’s Direct Contracting Entity in connection with the Centers
for Medicare & Medicaid Services’ Global and Professional
Direct Contracting Model. We believe that lives under management is
a useful measure of the size of the beneficiary population managed
by the Company.
CMS benchmark expenditures - A CMS calculation using
risk-adjusted average per capita expenditures for Medicare Parts A
and B services under the original Medicare Fee-For-Service program.
This represents the level of estimated medical expenses for the
beneficiary population being managed by the Direct Contracting
Entity.
Estimated Direct Contracting Revenues - GAAP revenues for Direct
Contracting are dependent on the finalization of accounting
treatment, which we expect will be completed by the end of the
second quarter of 2021. We believe that the estimated CMS benchmark
expenditures represent a measure of the size of our opportunity
under the program and its impact on our operations.
Medical Care Ratio, Gross and Net - We calculate our medical
care ratio (MCR) by dividing total net medical claim expenses
incurred by premiums earned, in each case on a gross or net basis,
as the case may be, in a given period. We believe our MCR is an
indicator of our gross profit for our Medicare Advantage plans and
the ability of our Clover Assistant platform to capture and analyze
data over time to generate actionable insights for returning
members to improve care and reduce medical expenses.
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