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 third 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.
"Our mission is to improve every life; we do so
by providing access to care across a wide, open network, which is
supported and enabled by our technology platform, the Clover
Assistant. We serve a broader variety of communities than is
typical in MA - approximately 66% of our members live in
communities in the top half of the area deprivation index and
approximately 49% of our members who self-identify are minorities -
and we are proud that we have been identified as a high-performing
MA plan based on a prototype of the Health Equity Summary Score,"
said Clover Health CEO Vivek Garipalli. "Clover’s wide network and
the Clover Assistant platform helped drive record growth, which was
complemented by a significant decrease in MCR. We are also pleased
that our wide network PPO, designed so that one day we can provide
care to everyone in the Medicare market, was recently upgraded to
3.5 stars. As we look forward to 2022, we believe our solid
execution will lead to continued rapid growth of Lives under Clover
Management and lower MCR through enhanced operational efficiencies
and improved clinical care."
Andrew Toy, President and CTO of Clover Health
added, "As the Clover Assistant evolves, we believe it will
continue to drive better outcomes for all constituents -
physicians, patients and the government. To this point, in the
third quarter, MA members with a PCP live on Clover Assistant had
an MCR that was more than 1,000 basis points lower than members who
did not. Further, our internal data suggests that the longer a PCP
uses the Clover Assistant for care management, the lower the MCR of
their patients. This is evident in our data year-over-year over the
past several years."
Management Commentary on Financial
Highlights
"Clover continues to scale with a current annual
revenue run rate of $1.7 billion. We expect our strong growth to
continue," said Clover’s Interim CFO Mark Herbers." At the same
time, Clover is making significant strides in its planning towards
achieving profitability, and we expect to see tangible progress
towards that goal in 2022 by focusing on leveraging the synergies
of our physician-centric approach across multiple business lines,
driving operational efficiencies with partners and vendors, and by
automating more of our processes."
Key Company highlights are as follows:
Dollars in Millions |
|
Q3’21 |
|
Q3’20 |
Total Revenue |
|
$ |
427.2 |
|
|
$ |
169.1 |
|
GAAP Medicare Advantage (MA) Medical Care Ratio
(MCR) |
|
102.5 |
% |
|
86.7 |
% |
Normalized MA MCR (Non-GAAP)
(1) |
|
94.8 |
|
|
96.4 |
|
Salaries and benefits plus General and administrative
expenses |
|
$ |
119.1 |
|
|
$ |
46.5 |
|
Adjusted Operating Expenses (Non-GAAP)
(1) |
|
72.3 |
|
|
45.0 |
|
Net (Loss) Income |
|
(34.5 |
) |
|
12.8 |
|
Adjusted EBITDA (Non-GAAP)
(1) |
|
(102.3 |
) |
|
(20.0 |
) |
Normalized Adjusted EBITDA (Non-GAAP)
(1) |
|
(61.1 |
) |
|
(36.8 |
) |
|
|
|
|
|
|
|
(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.
Third Quarter 2021 Financial
Highlights
- Total
revenue was $427 million in the third quarter of 2021, a 153%
increase compared to $169 million in the third quarter of 2020.
This consisted of $204 million in Medicare Advantage premiums and
$223 million in Direct Contracting revenue.
- Lives
under Clover Management at quarter-end was approximately 129,100,
an increase of 125% compared to September 30, 2020. Medicare
Advantage membership and Direct Contracting lives were 67,281 and
61,818, respectively, as of September 30, 2021.
- Our GAAP Medicare
Advantage MCR for the quarter was 102.5%, compared to 111.0% for
second quarter 2021 and 86.7% for third quarter 2020. The
year-over-year increase was primarily driven by higher direct
expenses for caring for members impacted by COVID-19 and increased
utilization from deferred outpatient care, while the sequential
decrease was driven largely by operational efficiencies, a decline
in direct COVID costs, and seasonal trends. 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 94.8% for the quarter, as compared to 96.3%
for second quarter 2021 and 96.4% for third quarter 2020.
- Direct Contracting
Margin, which represents the ratio of net medical claims incurred
for our Direct Contracting segment to Direct Contracting revenue,
was 102.4% for the quarter, down from 111.8% in the second quarter.
Adjusted Direct Contracting Margin (Non-GAAP)(1) was 101.3%. This
measure excludes direct COVID-19 expenses and prior period
development. We believe that we do not currently have sufficient
data or historical claims to calculate a fully "normalized" MCR
calculation. We expect the financial performance of Direct
Contracting to improve as a result of a full ramp-up in a number of
areas, including clinical initiatives, additional impact from the
Clover Assistant, projected declines in direct COVID costs,
reductions in pent-up demand, timing of stop-loss recoupments and
potential benchmark trend adjustments by the Centers for Medicare
and Medicaid Services (CMS).
- Salaries and
benefits plus General and administrative expenses for the quarter
were $119.1 million, compared to $46.5 million for third quarter
2020, an increase of $72.6 million. The largest component of this
increase was non-cash, stock-based compensation expense.
- Premium deficiency
reserve expense was $20.8 million for the third quarter, in
anticipation of a reserve deemed necessary for the remainder of
2021. This compared to a $0.8 million benefit in third quarter
2020.
- GAAP net (loss)
income for the quarter was $(34.5) million, compared to net income
of $12.8 million for third quarter 2020. Our third quarter 2021
results reflect a non-cash benefit of $115.2 million relating to
the change in the fair value of our public and private placement
warrant liabilities.
- Adjusted EBITDA
loss (Non-GAAP) for the quarter was $(102.3) million, and
Normalized Adjusted EBITDA loss (Non-GAAP), which excludes Direct
Contracting gross profit or loss, the estimated impact of the
COVID-19 pandemic on our MA results, and certain other items, was
$(61.1) million.
- Cash, cash
equivalents and investments totaled $588.7 million as of
September 30, 2021.
(1) A reconciliation of Adjusted Direct
Contracting Margin (Non-GAAP) to Direct Contracting Margin is
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.
Clover Assistant (CA)
Highlights
- Lives under Clover
Assistant Management grew 223% year-over-year to approximately
94,000 at September 30, 2021. Approximately 2,900 NPIs used
Clover Assistant in the third quarter, up 45% year-over-year.
- MA members who saw
a PCP live on Clover Assistant had an MCR that was more than 1,000
basis points lower than for members who didn't during third quarter
2021. Further, our MA members with PCPs who were live on CA in 2019
had a lower MCR than members with PCPs who went live on CA in 2020,
and members with PCPs who went live on CA in 2018 had a lower MCR
than members who went live on CA in 2019.
- Clover Assistant
visits increased 73% year-over-year in the third quarter. Since
inception in 2018, the Clover Assistant has surfaced 1.3 million
recommendations to physicians.
- We have recently
launched several new feature releases on CA. Highlighted features
include:
- Improved PCP
workflows through several quality of life improvements;
- Interoperability
features enabling CA to integrate with electronic health record
systems; and
- PCPs now have easy
access to specialist support services for oncology.
The following screenshots provide visual
examples of the Clover Assistant interface, with data provided for
fictitious patients:
Photos accompanying this announcement are available at:
https://www.globenewswire.com/NewsRoom/AttachmentNg/5d3db006-2871-447f-b6b6-3fab8a0a1420
https://www.globenewswire.com/NewsRoom/AttachmentNg/ca1ed906-b721-4e02-8f85-d313ffd3b471
MA Star Rating
CMS recently upgraded Clover’s PPO plan to 3.5
stars on the Medicare Star Ratings for its Medicare Advantage (MA)
plans for the 2020 measurement year. Currently, over 90% of
Clover’s MA membership is served through its PPO plan.
We believe that this is a significant event for
Clover for several reasons. First, we anticipate the higher Star
Rating will positively impact our MA MCR in 2023 by 300 to 500
basis points assuming similar plan design to current offerings,
driving meaningful support of profitability. Further, we believe a
potential move from 3.5 to 4.0 stars in a future measurement year
could have an even larger impact on our MA MCR. Second, the higher
Star Rating was achieved on a wide network plan that serves a
higher percentage of underserved beneficiaries than is typical in
the industry. We believe this is a proof point that our
tech-centric approach to Medicare and health equity is working and
is applicable across the full Medicare population as opposed to
only small, high-performing segments.
Normalized MA MCR
(Non-GAAP)
In calculating Normalized MA MCR (Non-GAAP), we
subtract or add, as applicable, 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, an estimate of other adjustments in the current period
which relate to prior period dates of service, and 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 Normalized
MA MCR (Non-GAAP) calculation represents management’s current
estimates and assumptions regarding the impacts of the COVID-19
pandemic on the Company’s financial results and remains 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
definition of "Normalized MCR" in Appendix A.
Applying this methodology for calculating our
Normalized MA MCR (Non-GAAP), as illustrated in the following
chart, in the third quarter, our Normalized MA MCR was
94.8%(1).
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/73c09abb-5332-4129-9ad2-6789a3a7cfaf
(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. A reconciliation of Normalized MA MCR
(non-GAAP) to GAAP MA MCR is provided in the tables immediately
following the consolidated financial statements below, and a
detailed explanation of Normalized MA MCR (non-GAAP), including a
description the non-GAAP adjustments, is provided in Appendix
A.
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, expediting recognizing
recoveries, and improved Star Ratings. We note that there can be no
assurance that we will be able to maintain or improve our Star
Ratings beyond the 3.5 Stars recently awarded by CMS to our PPO
plan 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 and the Risk Factors section of our Quarterly
Report on Form 10-Q for the quarter ended September 30, 2021,
which we plan to file with the Securities and Exchange Commission
on November 9, 2021.
We have attempted to illustrate this potential
improvement in Normalized MA MCR (Non-GAAP) in the table
below(1).
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/59bc2728-697e-4def-b185-0706305c52cc
(1) This Long-Term Pro Forma MA MCR chart
represents a hypothetical scenario based on management estimates
and assumptions, and reflects maximum beneficial impact on MA MCR
from incremental improvements in Star ratings. Among other
limitations to the methodology reflected in this chart, if the
illustrative MA MCR improvements were to occur, the Company would
cede some margin to its MA Members through the form of enhanced
plan benefits. This section contains 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 additional information, including a reconciliation to the
corresponding GAAP financial measures for historical periods, see
the tables immediately following the consolidated financial
statements below.
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 $1.42 billion to $1.47 billion. This
includes projected MA revenue of $780 million to $790 million and
Direct Contracting revenue of $640 million to $680 million.
- Medicare Advantage
membership is expected to be in the range of 67,300 - 68,000 by
December 31, 2021, a growth rate of 16% - 17% as compared to
year-end 2020.
- For the Direct
Contracting program, the Company expects the number of aligned
beneficiaries to remain roughly flat for the remainder of
2021.
- Normalized MA MCR
(Non-GAAP)(1) is expected to be in the range of 94% - 96%.
- 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 $270 and $280
million.
- Adjusted Operating
Expenses as a percentage of revenue (Non-GAAP)(1) is expected to be
17% in fourth quarter 2021, compared to 19% in the first three
quarters of 2021 and 22% in full year 2020.
- Normalized Adjusted
EBITDA loss (Non-GAAP)(1) is expected to be in the range of ($250)
- ($230) million.
For full-year 2022, Clover Health is providing
the following preliminary directional commentary:
- Medicare Advantage
membership is expected to average 82,000 for the full year,
representing an acceleration in year-over-year growth to more than
20%. This includes an expected doubling of lives in Georgia to a
projected 2022 average of approximately 8,500. Direct
Contracting lives are expected to grow significantly from current
levels, and similar to this year, almost all growth will come
through claims alignment.
- GAAP MA MCR is
expected to be in the range of 95% - 99%. Improvement is expected
to be driven by continued clinical program enhancements, increased
risk scores and lower COVID-19 costs. Direct Contracting Margin is
also expected to improve versus 2021 levels. This guidance assumes
current COVID-19 trends continue, and any significant developments
related to COVID-19 could impact expectations.
- Adjusted Operating
Expenses (Non-GAAP)(1), which we define as Salaries and benefits
plus General and administrative expenses less stock-based
compensation expense, are expected to grow at a significantly lower
rate than in 2021 due to operational efficiencies.
- Clover expects to
provide guidance for 2022 Direct Contracting lives and consolidated
revenue at a later date after expected Direct Contracting lives are
finalized..
(1) A reconciliation of projected Normalized MA
MCR (Non-GAAP) to projected GAAP MA MCR is not provided because
COVID-related costs, which are excluded from Normalized MA MCR
(Non-GAAP), cannot be reasonably calculated or predicted at this
time without unreasonable efforts. Reconciliations of projected
Adjusted Operating Expenses (Non-GAAP) to projected Salaries and
benefits plus General and administrative expenses, and of projected
Adjusted Operating Expenses as a Percentage of Revenue (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 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 related to our MA operations, 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,
November 8, 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, MA MCR, Direct Contracting Margin,
Normalized MA MCR (Non-GAAP), Adjusted Operating Expenses
(Non-GAAP), Adjusted Operating Expenses as a percentage of revenue
(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 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 September 30, 2021, which we expect to file
with the SEC on November 9, 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
Direct Contracting Margin, 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 to, 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."
The statements contained in this document are
solely those of the authors and do not necessarily reflect the
views or policies of CMS. The authors assume responsibility for the
accuracy and completeness of the information contained in this
document.
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
Nuemaninvestors@cloverhealth.com
Press Contact:Andrew
Still-Baxterpress@cloverhealth.com
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS: SELECTED METRICS(in
thousands)
|
September 30,2021(Unaudited) |
|
December 31,2020 |
Selected Balance Sheet Data: |
|
|
|
Cash, cash equivalents and investments |
$ |
588,674 |
|
|
$ |
151,103 |
|
Total assets |
952,478 |
|
|
267,252 |
|
Unpaid claims |
140,210 |
|
|
103,976 |
|
Notes and securities payable, net of discount and deferred issuance
costs |
19,929 |
|
|
106,413 |
|
Warrants payable |
— |
|
|
97,782 |
|
Total liabilities |
540,188 |
|
|
432,698 |
|
Convertible Preferred stock |
— |
|
|
447,747 |
|
Total stockholders' equity (deficit) |
412,290 |
|
|
(613,193 |
) |
|
|
|
|
|
|
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands) (Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues: |
|
|
|
|
|
|
|
Premiums earned, net (Net of ceded premiums of $120 and $126 for
the three months ended September 30, 2021 and 2020, respectively;
net of ceded premiums of $370 and $383 for the nine months ended
September 30, 2021 and 2020, respectively) |
$ |
203,657 |
|
|
$ |
167,075 |
|
|
$ |
598,390 |
|
|
$ |
501,100 |
|
Direct Contracting revenue |
222,647 |
|
|
— |
|
|
439,020 |
|
|
— |
|
Other income |
859 |
|
|
1,994 |
|
|
2,550 |
|
|
5,555 |
|
Total revenues |
427,163 |
|
|
169,069 |
|
|
1,039,960 |
|
|
506,655 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Net medical claims incurred |
436,422 |
|
|
144,846 |
|
|
1,109,375 |
|
|
410,540 |
|
Salaries and benefits |
73,364 |
|
|
16,628 |
|
|
201,555 |
|
|
57,339 |
|
General and administrative expenses |
45,749 |
|
|
29,847 |
|
|
129,983 |
|
|
79,798 |
|
Premium deficiency reserve expense (benefit) |
20,761 |
|
|
(772 |
) |
|
48,661 |
|
|
(16,357 |
) |
Depreciation and amortization |
120 |
|
|
138 |
|
|
398 |
|
|
413 |
|
Other expense |
— |
|
|
— |
|
|
191 |
|
|
— |
|
Total operating expenses |
576,416 |
|
|
190,687 |
|
|
1,490,163 |
|
|
531,733 |
|
Loss from operations |
(149,253 |
) |
|
(21,618 |
) |
|
(450,203 |
) |
|
(25,078 |
) |
|
|
|
|
|
|
|
|
Change in fair value of warrants payable |
(115,152 |
) |
|
20,029 |
|
|
(66,146 |
) |
|
31,903 |
|
Interest expense |
413 |
|
|
9,268 |
|
|
2,817 |
|
|
25,560 |
|
Amortization of notes and securities discounts |
13 |
|
|
4,408 |
|
|
13,681 |
|
|
14,935 |
|
Gain on derivative |
— |
|
|
(68,081 |
) |
|
— |
|
|
(87,475 |
) |
Net (loss) income |
$ |
(34,527 |
) |
|
$ |
12,758 |
|
|
$ |
(400,555 |
) |
|
$ |
(10,001 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
ADJUSTED EBITDA AND NORMALIZED ADJUSTED EBITDA RECONCILIATION |
(in thousands) (Unaudited)(1) |
|
|
|
|
|
Three Months EndedSeptember
30, |
|
2021 |
|
2020 |
Net (loss) income: |
$ |
(34,527 |
) |
|
$ |
12,758 |
|
Adjustments |
|
|
|
Interest expense |
413 |
|
|
9,268 |
|
Amortization of notes and securities discount |
13 |
|
|
4,408 |
|
Depreciation and amortization |
120 |
|
|
138 |
|
Change in fair value of warrants payable |
(115,152 |
) |
|
20,029 |
|
Gain on derivative |
— |
|
|
(68,081 |
) |
Stock-based compensation expense |
46,803 |
|
|
1,500 |
|
Adjusted
EBITDA (Non-GAAP) |
$ |
(102,330 |
) |
|
$ |
(19,980 |
) |
Normalization adjustments |
|
|
|
MA direct COVID related costs |
$ |
6,012 |
|
|
$ |
3,783 |
|
MA prior period development |
(5,837 |
) |
|
(8,104 |
) |
MA unrealized 2020 risk adjustment |
7,682 |
|
|
— |
|
MA excess (reduced) utilization due to COVID |
7,217 |
|
|
(11,708 |
) |
Premium deficiency reserve expense (benefit) |
20,761 |
|
|
(772 |
) |
Direct Contracting gross loss adjustment |
5,413 |
|
|
— |
|
Normalized adjusted EBITDA (Non-GAAP) |
$ |
(61,082 |
) |
|
$ |
(36,781 |
) |
|
|
|
|
|
|
|
|
(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.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESNORMALIZED
MA MCR (NON-GAAP) RECONCILIATION(Unaudited)(1)
|
Three Months EndedSeptember
30, |
|
2021 |
|
2020 |
GAAP MA MCR: |
102.5 |
% |
|
86.7 |
% |
Adjustments |
|
|
|
Direct COVID related costs |
(3.1 |
) |
|
(2.3 |
) |
Prior period development |
2.9 |
|
|
5.0 |
|
Unrealized 2020 risk adjustment |
(3.8 |
) |
|
— |
|
(Reduced) excess utilization due to COVID |
(3.7 |
) |
|
7.0 |
|
Normalized MA MCR (Non-GAAP) |
94.8 |
% |
|
96.4 |
% |
|
|
|
|
|
|
(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.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESNORMALIZED
MA MCR (NON-GAAP) RECONCILIATION(Unaudited)(1)
|
Nine Months EndedSeptember 30, 2021 |
GAAP MA MCR: |
107.1 |
% |
Adjustments |
|
Direct COVID related costs |
(7.3 |
) |
Prior period development |
(1.6 |
) |
Unrealized 2020 risk adjustment |
(3.8 |
) |
Excess (reduced) utilization due to COVID |
(0.2 |
) |
Normalized MA MCR (Non-GAAP) |
94.2 |
% |
|
|
|
(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.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED
DIRECT CONTRACTING MARGIN (NON-GAAP)
RECONCILIATION(Unaudited)(1)
|
Three Months EndedSeptember 30,
2021 |
Direct Contracting revenue (in thousands) |
$ |
222,647 |
|
Direct Contracting medical claims incurred (in thousands) |
228,060 |
|
Direct Contracting Margin |
102.4 |
% |
|
|
Direct Contracting margin: |
102.4 |
% |
Adjustments |
|
Direct COVID related costs |
(3.4 |
) |
Prior period development |
2.3 |
|
Adjusted Direct Contracting Margin (Non-GAAP) |
101.3 |
% |
|
|
|
(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.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED
OPERATING EXPENSES (NON-GAAP) RECONCILIATION(in thousands)
(Unaudited)(1)
|
Three Months EndedSeptember
30, |
|
2021 |
|
2020 |
Salaries and benefits |
$ |
73,364 |
|
|
$ |
16,628 |
|
General and administrative expenses |
45,749 |
|
|
29,847 |
|
Total Salaries and benefits plus General and administrative
expenses |
119,113 |
|
|
46,475 |
|
Adjustments |
|
|
|
Stock-based compensation expense |
(46,803 |
) |
|
(1,500 |
) |
Adjusted Operating Expenses (Non-GAAP) |
$ |
72,310 |
|
|
$ |
44,975 |
|
|
|
|
|
Total revenues |
$ |
427,163 |
|
|
169,069 |
|
Adjusted Operating Expenses (Non-GAAP) as a Percentage of
Revenue |
17 |
% |
|
27 |
% |
|
|
|
|
|
|
(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.
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESAppendix AExplanation 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 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
Illustrative Long-Term Pro Forma MA MCR (Non-GAAP) provided on page
6.
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.
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 that was
terminated in the second quarter of 2021.
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 under contracts
without consideration of investment income. 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.
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 MCR for higher Star plan
rating. Currently, Clover’s MA plans have a 3 Star plan rating, and
its MA PPO plan was recently awarded 3.5 stars for the 2020
measurement year. In the Illustrative Long-Term Pro Forma MA MCR
(Non-GAAP) provided on page 6, we have presented the pro forma
impact of potential higher ratings 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 2021.
The issues that caused the deterioration have been identified and
resolved. Therefore, we have excluded the impact of the process
deterioration from our Illustrative Long-Term Pro Forma MA MCR
(Non-GAAP) provided on page 6.
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.
Adjusted Direct Contracting Margin - A non-GAAP
financial measure that excludes from Direct Contracting Margin (as
defined below) direct COVID-related costs and prior period
development. 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-19 pandemic.
Normalized 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, stock-based compensation
expense, premium deficiency reserve expense or benefit, Direct
Contracting gross profit or loss, and, with respect to our MA
segment, direct COVID-related costs, prior period development,
unrealized 2020 risk adjustment, and excess (reduced) utilization
due to COVID. 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-19 pandemic.
Definitions of Other Items
Direct Contracting Margin - We calculate our
Direct Contracting Margin by dividing net medical claims incurred
in connection with our Direct Contracting operations by Direct
Contracting revenue in a given period. We believe our Direct
Contracting Margin is an indicator of our gross profitability and
our ability to capture and analyze data over time to generate
actionable insights for returning beneficiaries to improve care and
reduce medical expenses.
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 September 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 Clover 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 claims 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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