Clover Health (Nasdaq: CLOV) ("Clover" or the "Company"), a
next-generation healthcare company focused on improving health
outcomes for America's seniors, today reported financial results
for the second quarter of 2021. Management will host a conference
call today at 5:00 p.m. ET to discuss its operating results and
other business highlights.
"Clover took another step in its journey to
improve every life with the launch of Direct Contracting this past
quarter. This milestone more than doubled our revenue and nearly
doubled lives under Clover Assistant management," said Clover
Health CEO Vivek Garipalli. "We have ambitious goals to maintain an
aggressive growth trajectory while pursuing our mission to improve
every life by making great healthcare available and affordable to
all American seniors regardless of health, wealth, or economic
status. We’re proud of what we’ve already achieved, and look
forward to continued progress in the second half of the year."
Andrew Toy, President and CTO of Clover Health
added, "The Clover Assistant continues to be a key differentiator
which underpins our unique model. The Clover Assistant has
approximately 95,000 lives under management and is on pace to
manage over $1 billion of annualized revenue. Most importantly, we
believe the Clover Assistant drives better outcomes for our
members. Additionally, our Non-GAAP Normalized MA MCR for
returning MA members attributed to a provider live on Clover
Assistant was 720 bps lower than members attributed to non-CA
providers. Our top six markets by membership, in which over 74% of
our MA members received a CA visit in 2020, had a Normalized MA MCR
(Non-GAAP) of 86.6% in first quarter 2021. We continue to deeply
invest in the Clover Assistant platform, and our product and
technology teams are constantly working to launch exciting new
features such as deeper EHR integrations as well as supporting
specialized services like diabetes management."
Management Commentary on Financial
Highlights
"Second quarter revenue grew 140% year-over-year
due primarily to the launch of Direct Contracting. Clover is on a
$1.6 billion annual revenue run rate based on the second quarter
results," said Joe Wagner, Clover Health CFO. "We believe our
Normalized MA MCR (non-GAAP), which adjusts for COVID-related
impacts, demonstrates stability in this measure year-over-year, and
we continue to see positive results from returning members and
those who see Clover Assistant providers. On a GAAP basis, similar
to other MA plans, we saw an elevated MA MCR from increased
utilization, much of which we believe was deferred in prior periods
due to COVID in our New Jersey/New York markets. In contrast, in
the second quarter of 2020, Clover reported a GAAP MCR of 70.1% due
to a significant decrease in utilization. Neither our results in
this quarter nor in the second quarter of 2020 represent the
underlying fundamentals of our business. Over time we expect these
extraordinary costs to trend down, consistent with our Normalized
(non-GAAP) calculations.'
Key Company highlights are as follows:
Dollars in Millions |
|
Q2’21 |
|
Q2’20 |
Total Revenue |
|
$ |
412.5 |
|
|
|
$ |
172.1 |
|
|
GAAP Medicare
Advantage (MA) Medical Care Ratio (MCR) |
|
111.0 |
|
% |
|
70.1 |
|
% |
Normalized MA MCR
(Non-GAAP) (1)(2) |
|
97.0 |
|
|
|
97.5 |
|
|
Salaries and benefits
plus General and administrative expenses |
|
$ |
107.8 |
|
|
|
$ |
40.7 |
|
|
Adjusted Operating
Expenses (Non-GAAP) (1) |
|
64.8 |
|
|
|
39.2 |
|
|
Net (Loss)
Income |
|
(317.6 |
) |
|
|
5.4 |
|
|
Adjusted EBITDA
(Non-GAAP) (1) |
|
(138.7 |
) |
|
|
24.8 |
|
|
Normalized Adjusted
EBITDA (Non-GAAP) (1)(2) |
|
(58.0 |
) |
|
|
(33.2 |
) |
|
(1) Reconciliations of Normalized MA MCR
(Non-GAAP) to GAAP MA 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.
(2) In second quarter 2021, the Company updated
its methodology for calculating Normalized MA MCR (Non-GAAP) and
Normalized Adjusted EBITDA (Non-GAAP). Prior period measures have
been revised to conform to the current period presentation.
Additional information can be found under the caption "Normalized
MA MCR (Non-GAAP) and Normalized Adjusted EBITDA (Non-GAAP)" below
and in Appendix A.
Second Quarter 2021 Financial
Highlights
- Total revenue was
$412.5 million in second quarter 2021, a 139.7% increase compared
to $172.1 million in second quarter 2020. This consisted of $195.4
million in Medicare Advantage premiums and $216.4 million in Direct
Contracting revenue.
- Total lives under
Clover management at quarter end was approximately 129,000, an
increase of 126.3% compared to June 30, 2020. Medicare
Advantage membership and Direct Contracting lives were 66,566 and
62,025, respectively, as of June 30, 2021.
- Our GAAP Medicare
Advantage MCR for the quarter was 111.0%, compared to 70.1% for Q2
2020. Normalized Medicare Advantage 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 97.0% for
the quarter, as compared to 97.5% for Q2 2020. The year-over-year
increase in GAAP Medicare Advantage MCR was primarily driven by
increases in direct expenses for caring for members impacted by
COVID-19 and increased utilization from outpatient deferred care.
Please see "Normalized MA MCR (Non-GAAP) and Normalized Adjusted
EBITDA (Non-GAAP)" below for more details on our GAAP MA MCR and
our Non-GAAP Normalized MA MCR.
- Our final financial
results for Direct Contracting will not be finalized until the CMS
reconciliation for year one occurs. Direct Contracting GAAP net
medical claims incurred were $241.9 million. We believe Direct
Contracting net medical claims incurred were impacted similarly to
Medicare Advantage by COVID-19; however, due to the newness of the
program, we are not providing a "normalized" estimate of net
medical claims incurred. We expect the financial performance of
Direct Contracting for the remainder of the year to improve.
- Salaries and
benefits plus General and administrative expenses for the quarter
were $107.8 million compared to $40.7 million for the second
quarter of 2020, an increase of $67.1 million. This increase
related primarily to an increase in stock-based compensation
expense, which is a non-cash expense.
- Premium deficiency
reserve expense was $27.9 million for the second quarter, in
anticipation of a reserve deemed necessary for the remainder of
2021. This compared to a $11.3 million benefit in second quarter
2020.
- GAAP net (loss)
income for the quarter was $(317.6) million compared to net income
of $5.4 million for the second quarter of 2020. Our second quarter
2021 results were impacted by a non-cash loss of $134.5 million
relating to the change in the fair value of our public and private
placement warrants.
- Adjusted EBITDA
loss (Non-GAAP) for the quarter was $(138.7) million, and
Normalized Adjusted EBITDA loss (Non-GAAP), which reflects the
impact of the COVID-19 pandemic was $(58.0) million.
- Cash, cash
equivalents and investments totaled $630.3 million as of
June 30, 2021.
Clover Assistant Highlights
- Lives under Clover
Assistant management grew 229% year-over-year to approximately
95,000.
- Clover Assistant is
on track to manage over $1 billion in annualized revenue.
- Normalized MA MCR
(Non-GAAP) for returning members attributed to a provider live on
Clover Assistant was 720 bps lower than members attributed to a
non-CA provider during H1 2021. The incurred MA MCR differential,
which the Company has reported historically, was 1,710 basis
points, in H1 2021.
- In first quarter
2021, for which almost all claims have been received, the Clover
Assistant demonstrated strong performance. We believe the following
is illustrative of the impact that greater Clover Assistant
penetration can have on our Normalized MA MCR (Non-GAAP), and that
over time, as Clover Assistant coverage matures in our newer
markets, our overall plan performance will benefit:
- Overall MA
Membership (100% of total MA membership): 62% of members received a
Clover Assistant visit in 2020. Normalized MCR in Q1 2021 was
91.7%.
- In our top six
counties by enrollment (59% of total MA membership): 74% of these
members received a Clover Assistant visit in 2020. Normalized MCR
in Q1 2021 was 86.6%.
- In the remaining
counties (41% of total MA membership): 39% of these members
received a Clover Assistant visit in 2020. Normalized MCR in Q1
2021 was 100.4%.
Normalized MA MCR (Non-GAAP) and
Normalized Adjusted EBITDA (Non-GAAP)
In second quarter 2021, we updated our
definitions of Normalized MA MCR (Non-GAAP) and Normalized Adjusted
EBITDA (Non-GAAP). Previously, the Company was subtracting from or
adding to, as applicable, its "normalized" measures, direct
COVID-related costs, including utilization deferred in prior
periods, an estimate of the net effect of care deferred or
eliminated by the COVID-19 environment, and an estimate of other
adjustments in the current period which relate to prior period
dates of service. The Company is now also reflecting in these
"normalized" measures an estimate of the COVID-19 pandemic’s impact
on the Company’s premium revenue, which management believes has
been impacted by lower risk adjustment scores in 2021 due to
reduced utilization and less thorough and accurate documentation of
our members’ clinical utilization in 2020 due to the COVID-19
environment. The Company has also updated the way it estimates care
that was deferred from prior periods due to the COVID-19 pandemic
and ultimately realized in the current period and now also adjusts
its Normalized Adjusted EBITDA (Non-GAAP) calculations for premium
deficiency reserve expense and Direct Contracting gross profit or
loss. Management believes that these updated definitions better
reflect the Company’s underlying fundamentals and provide a more
meaningful view of the Company’s results on a hypothetical
"COVID-less" basis. The Normalized MA MCR (Non-GAAP) and Normalized
Adjusted EBITDA (Non-GAAP) calculations represent management’s
current estimates and assumptions regarding the impacts of the
COVID-19 pandemic on the Company’s financial results, including our
MCR, and remain subject to significant uncertainties, including the
ultimate severity, magnitude and duration of the COVID-19 pandemic,
including the development of new COVID-19 variants, and the
potential for further deferrals of elective or preventive care due
to additional COVID-19 outbreaks and stay-at-home orders and the
resulting impact on future medical complications, future medical
costs and/or a reduction in risk adjustments and benchmarks against
which future CMS bids will be assessed. For additional information,
see the definitions of "Normalized Adjusted EBITDA" and "Normalized
MA MCR" in Appendix A.
Applying this new methodology for calculating
our Normalized MA MCR (Non-GAAP), in the second quarter, our
Normalized MA MCR was 97.0%, similar to the full-year 2020
Normalized MA MCR and higher than our Q1 2021 Normalized MA MCR,
primarily due to seasonal factors.
Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/91b7e278-7751-4e55-a967-0588e9c9eccc
https://www.globenewswire.com/NewsRoom/AttachmentNg/2edf0821-578c-44df-8dfa-29d6fe33821e
https://www.globenewswire.com/NewsRoom/AttachmentNg/4c847783-be7c-46a0-941a-7c287a372785
Management Long-Term View
Management continues to believe there is a
long-term opportunity to improve our Normalized MA MCR (Non-GAAP),
driven by potential improvements in internal processes, including
Utilization Management process changes, delay in recognizing
recoveries, and improved Star ratings. We believe improvements
relating to these factors could drive significant improvement in
our Normalized MA MCR (Non-GAAP), and this excludes any potential
future additional impact from the Clover Assistant, which we
believe is in the early innings of its potential. There can be no
assurance that we will be able to improve our Star ratings or that
the other assumptions we make will be achieved for the reasons
discussed in the Risk Factors section of our 2020 Annual Report on
Form 10-K, as supplemented by the Risk Factors included in our
Quarterly Report on Form 10-Q for the quarter ended June 30,
2021.
We have attempted to illustrate this potential
improvement in Normalized MA MCR (Non-GAAP) in the table below.
An additional photo accompanying this announcement is available
at
https://www.globenewswire.com/NewsRoom/AttachmentNg/335e0c6d-b5b9-40cb-8e65-434fe6c260c4
Financial Outlook
For full year 2021, Clover Health is providing
the following guidance and commentary:
- Total revenues are
expected to be in the range of $1.4 billion to $1.5 billion. This
reflects MA revenue of $760 million to $790 million and Medicare
Direct Contracting revenue of $650 million to $700 million.
- 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.
- For the Medicare
Direct Contracting program, the Company expects the number of
aligned beneficiaries to remain roughly flat for the remainder of
2021. Further, the Company expects a significant increase in total
aligned beneficiaries on January 1, 2022 when claims aligned
beneficiaries for 2022 become active.
- Normalized MCR
(Non-GAAP)(1) for Medicare Advantage is expected to be in the range
of 94% - 97%.
- Adjusted Operating
Expenses (Non-GAAP)(1), 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.
- Adjusted Operating
Expenses (Non-GAAP) as a percentage of revenue(1) is expected to be
16% in the second half of 2021 compared to 21% in the first half of
2021 and 22% in full year 2020.
- Normalized
Adjusted EBITDA loss (Non-GAAP)(1) is expected to be in the range
of $(250) - $(210) million. This excludes gross profit or loss from
Direct Contracting, reflecting the fact that we do not yet have
sufficient claims data to prepare a “normalized” result for the
Direct Contracting segment.
(1) Reconciliations of projected Adjusted
Operating Expenses (Non-GAAP) to projected Salaries and benefits
plus General and administrative expenses, and Adjusted Operating
Expenses (non-GAAP) to projected Salaries and benefits plus General
and administrative expenses, are 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, on an MA or Direct
Contracting basis, is not provided because COVID-related costs,
which are excluded from the applicable Normalized MCR (Non-GAAP)
financial measure, 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 Wednesday,
August 11, at 5:00 PM 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, projected levels of Direct Contracting aligned
beneficiaries, revenue growth, MCR, Normalized MA MCR (Non-GAAP) on
MA or Direct Contracting basis, Adjusted Operating Expenses
(Non-GAAP), Adjusted Operating Expenses (Non-GAAP) as a percentage
of revenue, Normalized Adjusted EBITDA (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 and beneficiary 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 for the
year ended December 31, 2020, filed with the Securities and
Exchange Commission (the "SEC") on March 31, 2021, as supplemented
by the Risk Factors included in our Quarterly Report on Form 10-Q
for the quarter ended June 30, 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 Adjusted
EBITDA, Adjusted Operating Expenses, Adjusted Operating Expenses as
a percentage of revenue, Normalized Adjusted EBITDA, and Normalized
MA MCR. 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 SEC, 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
next-generation risk-bearing organization aiming to achieve health
equity for all Americans. While our mission is to improve every
life, we particularly focus on seniors who have historically lacked
access to affordable high quality healthcare.
We aim to provide great care, in a sustainable
way, by having a business model built around improving medical
outcomes while lowering avoidable costs. We do this while taking a
holistic approach to understanding the health needs and social risk
factors of those under our care. This strategy is underpinned by
the company’s proprietary software platform, the Clover Assistant,
which is designed to aggregate patient data from across the health
ecosystem to support clinical decision-making by providing
physicians with real-time, personalized recommendations at the
point of care.
Making care more accessible is at the heart of
our business, and we believe patients should have the freedom to
choose their doctors. We offer two models of care: affordable
Medicare Advantage plans with extensive benefits; and care
coordination for Original Medicare beneficiaries through Direct
Contracting. For both programs, we provide primary care physicians
with the Clover Assistant and also make comprehensive home-based
care available via the Clover Home Care program.
With its corporate headquarters in Nashville,
Clover’s workforce is distributed around the U.S. and also includes
a team of world-class technologists based in Hong Kong. The company
manages care for Medicare beneficiaries in eleven states, including
Arizona, Georgia, Kansas, Mississippi, New Jersey, New York,
Pennsylvania, South Carolina, Tennessee, Texas and Vermont.
Contacts:
Investor Relations: Derrick Nueman
investors@cloverhealth.com
Press Contact: Andrew Still-Baxter
press@cloverhealth.com
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS: SELECTED METRICS(in
thousands)
|
June 30, 2021 (Unaudited) |
|
December 31, 2020 |
Selected Balance Sheet
Data: |
|
|
|
Cash, cash equivalents and investments |
$ |
630,251 |
|
|
$ |
151,103 |
|
Total assets |
1,215,897 |
|
|
267,252 |
|
Unpaid claims |
132,552 |
|
|
103,976 |
|
Notes and securities payable, net of discount and deferred issuance
costs |
19,852 |
|
|
106,413 |
|
Warrants payable |
196,520 |
|
|
97,782 |
|
Total liabilities |
901,042 |
|
|
432,698 |
|
Convertible Preferred Stock |
— |
|
|
447,747 |
|
Total stockholders' equity (deficit) |
314,855 |
|
|
(613,193 |
) |
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)(in
thousands)
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues: |
|
|
|
|
|
|
|
Premiums earned, net (Net of ceded premiums of $126 and $128 for
the three months ended June 30, 2021 and 2020, respectively; net of
ceded premiums of $250 and $257 for the six months ended June 30,
2021 and 2020, respectively) |
$ |
195,357 |
|
|
$ |
170,315 |
|
|
$ |
394,733 |
|
|
$ |
334,025 |
|
Direct Contracting revenue |
216,373 |
|
|
— |
|
|
216,373 |
|
|
— |
|
Other income |
742 |
|
|
1,766 |
|
|
1,691 |
|
|
3,561 |
|
Total revenues |
412,472 |
|
|
172,081 |
|
|
612,797 |
|
|
337,586 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Net medical claims incurred |
458,521 |
|
|
119,366 |
|
|
672,953 |
|
|
265,694 |
|
Salaries and benefits |
62,167 |
|
|
19,227 |
|
|
128,191 |
|
|
40,711 |
|
General and administrative expenses |
45,628 |
|
|
21,468 |
|
|
84,234 |
|
|
49,951 |
|
Premium deficiency reserve expense (benefit) |
27,900 |
|
|
(11,303 |
) |
|
27,900 |
|
|
(15,585 |
) |
Depreciation and amortization |
118 |
|
|
153 |
|
|
278 |
|
|
275 |
|
Other expense |
— |
|
|
— |
|
|
191 |
|
|
— |
|
Total operating expenses |
594,334 |
|
|
148,911 |
|
|
913,747 |
|
|
341,046 |
|
(Loss) income from
operations |
(181,862 |
) |
|
23,170 |
|
|
(300,950 |
) |
|
(3,460 |
) |
|
|
|
|
|
|
|
|
Change in fair value of
warrants payable |
134,512 |
|
|
9,637 |
|
|
49,006 |
|
|
11,874 |
|
Interest expense |
1,229 |
|
|
8,477 |
|
|
2,404 |
|
|
16,292 |
|
Amortization of notes and
securities discounts |
8 |
|
|
4,815 |
|
|
13,668 |
|
|
10,527 |
|
Gain on derivative |
— |
|
|
(5,162 |
) |
|
— |
|
|
(19,394 |
) |
Net (loss) income |
$ |
(317,611 |
) |
|
$ |
5,403 |
|
|
$ |
(366,028 |
) |
|
$ |
(22,759 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED
EBITDA AND NORMALIZED ADJUSTED EBITDA RECONCILIATION(in thousands)
(Unaudited)(1)
|
Three Months EndedJune 30, |
|
2021 |
|
2020 |
Net (loss) income |
$ |
(317,611 |
) |
|
$ |
5,403 |
|
Adjustments |
|
|
|
Interest expense |
1,229 |
|
|
8,477 |
|
Amortization of notes and securities discount |
8 |
|
|
4,815 |
|
Depreciation and amortization |
118 |
|
|
153 |
|
Change in fair value of warrants payable |
134,512 |
|
|
9,637 |
|
Gain on derivative |
— |
|
|
(5,162 |
) |
Stock-based compensation expense |
43,026 |
|
|
1,471 |
|
Adjusted EBITDA
(Non-GAAP) |
(138,718 |
) |
|
24,794 |
|
|
|
|
|
Normalization adjustments |
|
|
|
Direct COVID related costs |
9,584 |
|
|
23,096 |
|
Prior period development |
3,670 |
|
|
(12,064 |
) |
Unrealized 2020 risk adjustment |
7,649 |
|
|
— |
|
Excess (reduced) utilization due to COVID |
6,363 |
|
|
(57,723 |
) |
Premium deficiency reserve expense (benefit) |
27,900 |
|
|
(11,303 |
) |
Direct contracting gross loss adjustment |
25,539 |
|
|
— |
|
Normalized Adjusted EBITDA
(Non-GAAP)(2) |
$ |
(58,013 |
) |
|
$ |
(33,200 |
) |
|
|
|
|
|
|
|
|
(1) This section includes non-GAAP measures.
Non-GAAP financial measures are supplemental to 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.(2) In second quarter 2021, the Company
updated its calculation of Normalized Adjusted EBITDA (Non-GAAP) to
reflect an estimate of the COVID-19 pandemic's impact on the
Company's premium revenue. The Company also updated the way it
estimates care that was deferred from prior periods due to the
COVID-19 pandemic and ultimately realized in the current period,
and now also adjusts for premium deficiency reserve expense and
Direct Contracting gross profit or loss. Prior period measures have
been revised to conform to the current period presentation.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURESADJUSTED OPERATING EXPENSES (NON-GAAP) RECONCILIATION(in
thousands) (Unaudited)(1)
|
Three Months EndedJune 30, |
|
2021 |
|
2020 |
Salaries and benefits |
$ |
62,167 |
|
|
$ |
19,227 |
|
General and administrative
expenses |
45,628 |
|
|
21,468 |
|
Total Salaries and benefits plus General and administrative
expenses |
107,795 |
|
|
40,695 |
|
Adjustments |
|
|
|
Stock-based compensation expense |
(43,026) |
|
|
(1,471) |
|
Adjusted Operating Expenses
(Non-GAAP) |
$ |
64,769 |
|
|
$ |
39,224 |
|
(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
MA MCR (NON-GAAP) RECONCILIATION(Unaudited)(1)
|
Three Months EndedJune 30, |
|
2021 |
|
2020 |
GAAP MA MCR |
111.0 |
|
% |
|
70.1 |
|
% |
Adjustments |
|
|
|
Direct COVID related costs |
(4.9 |
) |
|
|
(13.6 |
) |
|
Prior period development |
(2.0 |
) |
|
|
7.1 |
|
|
Unrealized 2020 risk adjustment |
(3.8 |
) |
|
|
— |
|
|
Excess (reduced) utilization due to COVID |
(3.3 |
) |
|
|
33.9 |
|
|
Normalized MA MCR
(Non-GAAP)(2) |
97.0 |
|
% |
|
97.5 |
|
% |
(1) This section includes non-GAAP measures.
Non-GAAP financial measures are supplemental to 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.(2) In second quarter 2021, the Company
updated its calculation of Normalized MCR (Non-GAAP) to reflect an
estimate of the COVID-19 pandemic's impact on the Company's premium
revenue. The Company also updated the way it estimates care that
was deferred from prior periods due to the COVID-19 pandemic and
ultimately realized in the current period. Prior period measures
have been revised to conform to the current period
presentation.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESNORMALIZED
MA MCR (NON-GAAP) RECONCILIATION(Unaudited)(1)
|
Three Months EndedMarch 31,
2021 |
GAAP MA MCR |
107.6 |
|
% |
Adjustments |
|
Direct COVID related costs |
(14.2 |
) |
|
Prior period development |
(2.3 |
) |
|
Unrealized 2020 risk adjustment |
(3.6 |
) |
|
Reduced utilization due to COVID |
4.2 |
|
|
Normalized MA MCR
(Non-GAAP)(2) |
91.7 |
|
% |
(1) This section includes non-GAAP measures.
Non-GAAP financial measures are supplemental to 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.(2) In second quarter 2021, the Company
updated its calculation of Normalized MCR (Non-GAAP) to reflect an
estimate of the COVID-19 pandemic's impact on the Company's premium
revenue. The Company also updated the way it estimates care that
was deferred from prior periods due to the COVID-19 pandemic and
ultimately realized in the current period. Prior period measures
have been revised to conform to the current period
presentation.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESNORMALIZED
MA MCR (NON-GAAP) RECONCILIATION(Unaudited)(1)
|
Six Months EndedJune 30,
2021 |
GAAP MA MCR |
109.2 |
|
% |
Adjustments |
|
Direct COVID related costs |
(9.6 |
) |
|
Prior period development |
(2.0 |
) |
|
Unrealized 2020 risk adjustment |
(3.7 |
) |
|
Reduced utilization due to COVID |
0.5 |
|
|
Normalized MA MCR
(Non-GAAP)(2) |
94.4 |
|
% |
(1) This section includes non-GAAP measures.
Non-GAAP financial measures are supplemental to 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.(2) In second quarter 2021, the Company
updated its calculation of Normalized MCR (Non-GAAP) to reflect an
estimate of the COVID-19 pandemic's impact on the Company's premium
revenue. The Company also updated the way it estimates care that
was deferred from prior periods due to the COVID-19 pandemic and
ultimately realized in the current period. Prior period measures
have been revised to conform to the current period
presentation.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESAppendix A
Explanation of Non-GAAP Financial Measures and
Other Items
Non-GAAP Adjustments
We 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 warrants payable - The
fair value of warrant liabilities is estimated using a valuation
method based on the level of instrument, where the values of
various instruments where the values of various instruments are
estimated based on an analysis of future values, assuming various
future outcomes.
Depreciation and Amortization - Depreciation and
amortization consists of all depreciation and amortization expenses
associated with our property and equipment. Depreciation includes
expenses associated with property and equipment. Amortization
includes expenses associated with leasehold improvements.
Delay in Recognizing Recoveries – As a result of
implementation delays, we have been unable to accrue for the full
amount of expected recoveries related to improper claims payments.
We believe that we will ultimately recover these payments and have
excluded the impact of the delay from our calculation of the H1
2021 Illustrative Long-Term Pro Forma MA MCR (Non-GAAP) chart
provided in the press release.
Direct COVID related costs – This consists of
our estimate of costs associated with COVID-19 related care and
testing.
Excess (Reduced) Utilization due to COVID – This
consists of (1) our estimate of non-COVID-19 related services that
were deferred in prior periods and ultimately realized in the
current period, and (2) our estimate of utilization related to
conditions that were exacerbated by a lack of diagnoses and
treatment in prior periods due to the pandemic, for which we have
incurred higher cost of treatment in the current period. The
estimated cost of these services in the current period is excluded
from our Normalized MA MCR (Non-GAAP).
Premium deficiency reserve expense (benefit) –
This consists of a reserve established to the extent that the sum
of expected future costs, claim adjustment expenses, and
maintenance costs exceeds related future premiums. We assess the
profitability of our contracts with CMS to identify those contracts
where current operating results or forecasts indicate probable
future losses. Premium deficiency reserve expense (benefit) is
recognized in the period in which the losses are identified.
Direct contracting gross loss adjustment – This
consists of the elimination of gross loss recognized for the Direct
Contracting segment during the current period. We do not yet have
sufficient claims data to provide a normalized result for this
segment and therefore have excluded this amount in the current
period for purposes of calculating Normalized Adjusted EBITDA
(Non-GAAP).
Gain on Derivative - 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.
Interest Expense - Interest expense consists
mostly of interest expense associated with previously outstanding
non-convertible notes under our term loan facility. All remaining
principal and interest has been voluntarily paid and the facility
has been terminated as of June 29, 2021.
Prior Period Development – This consists of our
estimate of adjustments in the current period which relate to prior
period dates of service. We exclude these amounts from Normalized
MA MCR to isolate our estimate of current period performance.
Pro Forma for Stars Adjustment – This consists
of our estimate of the impact to GAAP MA MCR for a higher Star plan
rating. Currently, Clover has a 3 Star plan rating. In the H1 2021
Illustrative Long-Term Pro Forma MA MCR (Non-GAAP) chart provided
in the press release, we have presented the pro forma impact of
this estimate for illustrative purposes and note that Clover may
choose to use incremental revenue related to Stars improvement to
drive more benefits for members.
Stock Based Compensation Expense
- This consists of expenses for stock-based
payment awards granted to employees and non-employees.
UM (Utilization Management) Process Changes –
This consists of our estimate of the impact of process
deterioration in our utilization management program during the
first and second quarter of 2021. As of June 2021, the issues that
caused the deterioration have been identified and resolved.
Therefore, we have excluded the impact of the process deterioration
from our H1 2021 Illustrative Long-Term Pro Forma MA MCR (Non-GAAP)
chart provided in the press release.
Unrealized 2020 Risk Adjustment – This consists
of our estimate of COVID-19’s impact on member risk scores in 2021.
Reduced utilization in 2020 due to COVID-19 resulted in fewer
diagnoses being made and fewer chronic conditions being treated,
which had a negative impact on member risk scores and premium
revenue in 2021.
Non-GAAP Definitions
Adjusted EBITDA - A non-GAAP financial measure
defined by us as net loss before interest expense, amortization of
notes and securities discount, depreciation and amortization,
change in fair value of warrants payable, (gain) loss on
derivative, and stock-based compensation expense. Adjusted EBITDA
is a key measure used by our management team 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
management, investors and others a useful view of our operating
spend as it excludes non-cash, stock-based compensation. We believe
that Adjusted Operating Expenses as a Percentage of Revenue is
useful to management, investors, and others because it allows us to
measure our operational leverage as revenue scales.
Normalized Adjusted EBITDA - A non-GAAP
financial measure defined by us as net loss before interest
expense, amortization of notes and securities discounts,
depreciation and amortization, change in fair value of warrants
payable, (gain) on derivative, stock-based compensation expense,
direct COVID related costs, prior period development, unrealized
2020 risk adjustment, Excess (reduced) utilization due to COVID,
premium deficiency reserve expense or benefit, and Direct
Contracting gross profit or loss. 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 MA MCR - A non-GAAP financial measure
that excludes from MA MCR (as defined below) the impact of COVID-19
on medical costs and premium revenue and adjusts for the estimate
of prior period divergence from estimates. The impact of COVID-19
on medical costs consists of direct COVID related costs, prior
period development, unrealized 2020 risk adjustment, and Excess
(reduced) utilization due to COVID, and the impact on premium
revenue consists of estimates of COVID-19’s impact on member risk
scores. We believe that this metric, which is used by our
management team 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 Clover Assistant Management -
Medicare Advantage members and Original Medicare beneficiaries
attributed to CA physicians or practices live on the Clover
Assistant on or before June 30, 2021. We believe that Lives under
Clover Assistant Management is a useful measure of the size of the
beneficiary population for whom we believe we have the potential to
enhance healthcare delivery, reduce expenditures, and improve
care.
Lives under Clover Management - Consists of our
(i) Medicare Advantage members and (ii) Original Medicare
beneficiaries aligned to the Company’s Direct Contracting Entity
(DCE) via attribution to a DCE-participating provider through
alignment based on claims data or by beneficiary election through
voluntarily alignment, 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.
MA Medical Care Ratio, Gross and Net - We
calculate our MA 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.
Revenue under Clover Assistant Management -
Annualized revenues related to Medicare Advantage members and
Original Medicare beneficiaries attributed to CA physicians or
practices live on the Clover Assistant on or before June 30, 2021.
We believe that Revenue under Clover Assistant Management is a
useful measure of the market opportunity related to our flagship
software platform as well as the size of the expenditures that we
believe the Clover Assistant has the potential to reduce.
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