Clover Health Investments, Corp. (Nasdaq: CLOV) ("Clover" or the
"Company"), a physician enablement company focused on improving
health outcomes for America's seniors, today reported financial
results for the first quarter of 2022. Management will host a
conference call today at 5:00 p.m. ET to discuss its operating
results and other business highlights.
"2022 is off to a strong start, led by
significant year-over-year revenue growth and quarter-over-quarter
margin improvements in Insurance (Medicare Advantage) and
Non-Insurance (Direct Contracting)," said Clover Health CEO Vivek
Garipalli. "We believe our focus on balancing this strong growth
with ongoing action to further reduce MCRs and increase operational
efficiencies is powering our progress towards profitability."
Andrew Toy, President of Clover Health, added,
"This year we’ll continue investing in the Clover Assistant to
deliver data driven value based care and are rounding out our
leadership team with top level talent. Further, we believe our
focus on building a sustainable, intelligent, and efficient growth
engine will benefit our results by driving incremental scale,
improvements across our Insurance MCR, positive Non-Insurance
results, and more efficient operating expenses."
We have updated the names of our Medicare
Advantage (MA) and Direct Contracting segments to our Insurance and
Non-Insurance segments, respectively. We believe that this approach
better reflects each segment’s current role and contribution to our
business. There has been no change to the existing composition of
these segments, and previously reported consolidated and
segment-level financial results of the Company were not impacted by
these changes.
Key Company highlights are as follows:
Dollars in Millions |
|
Q1’22 |
|
Q1’21 |
Total Revenue |
|
$ |
874.4 |
|
|
$ |
200.3 |
|
Insurance MCR |
|
|
96.4 |
% |
|
|
107.9 |
% |
Non-Insurance MCR |
|
|
99.8 |
|
|
|
— |
|
Salaries and Benefits Plus
General and Administrative Expenses |
|
$ |
126.8 |
|
|
$ |
104.6 |
|
Adjusted Operating Expenses
(Non-GAAP) (1)(2) |
|
|
84.4 |
|
|
|
58.2 |
|
Net Loss |
|
|
(75.3 |
) |
|
|
(48.4 |
) |
Adjusted EBITDA (Non-GAAP)
(1)(2) |
|
|
(71.8 |
) |
|
|
(72.5 |
) |
(1) |
Adjusted Operating Expenses (Non-GAAP) and Adjusted EBITDA
(Non-GAAP) are non-GAAP financial measures. Reconciliations of
Adjusted Operating Expenses (Non-GAAP) to the sum of Salaries and
Benefits Plus General and Administrative Expenses and Adjusted
EBITDA (Non-GAAP) to Net Loss, respectively, the most directly
comparable GAAP measures, 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) |
Beginning in first quarter 2022, we are no longer reporting
Normalized MA MCR (Non-GAAP) and Normalized Adjusted EBITDA
(Non-GAAP), reflecting the expected reduction in the impact of the
COVID-19 pandemic on our financial results. We have also updated
our definition and presentation of Adjusted EBITDA (Non-GAAP) to
exclude premium deficiency reserve expense or benefit (PDR), gain
on investment, and expenses attributable to Seek Insurance
Services, Inc., and Clover Therapeutics Company. PDR is now being
excluded because management believes that PDR does not reflect the
Company’s underlying fundamentals due to the significant
variability in PDR from period to period and because it is a
non-cash item, gain on investment is being excluded because it is a
non-cash item and does not reflect the Company’s underlying
operations, and expenses attributable to Seek Insurance Services,
Inc., and Clover Therapeutics Company are being excluded because
management believes they are not reflective of the Company’s
operating expenses relating to its core businesses or its actual
recurring cash expense. The prior period figure has been revised to
conform to the updated definition and presentation. For additional
information, see the definition of "Adjusted EBITDA (Non-GAAP)" in
Appendix A. |
Lives under Clover
Management
|
March 31, 2022 |
|
March 31, 2021 |
Insurance Members |
85,026 |
|
66,348 |
Non-Insurance
Beneficiaries |
172,416 |
|
— |
Total Lives under Clover
Management |
257,442 |
|
66,348 |
Clover Assistant (CA)
Highlights
- Lives under Clover
Assistant Management grew ~550% year-over-year to 211,386.
- Approximately 3,600
unique users (NPIs) were live on Clover Assistant in the first
quarter, up ~43% year-over-year.
- During 2021, our
Insurance members whose primary care providers (PCPs) used the
Clover Assistant had an MCR that was more than 1,000 basis points
lower than members whose PCPs didn't. Further, our returning 2021
Insurance members with PCPs who were live on CA in 2018 had a 4.2%
lower incurred Insurance MCR (non-GAAP)(1) than members with PCPs
who went live on CA in 2019, and members with PCPs who went live on
CA in 2019 had a 5.5% lower incurred Insurance MCR (non-GAAP) than
members with PCPs who went live on CA in 2020.(1) Incurred
Insurance MCR (Non-GAAP) is a non-GAAP financial measure. A
reconciliation of Incurred Insurance MCR (Non-GAAP) to Insurance
MCR, the most directly comparable GAAP measure, 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.
Financial Outlook
"The first quarter was a solid start to the
year. We are cautiously optimistic about the remainder of 2022, and
are maintaining our expectations for a meaningful improvement over
last year," said Mark Herbers, interim Chief Financial Officer of
Clover Health. "We continue to focus on sustainable and intelligent
growth, including a deeper analysis of our specific markets, to
drive our go-to-market strategy. Importantly, we believe there are
multiple levers that we can utilize in order to drive another
step-wise improvement in our Insurance MCR, better Non-Insurance
results and lower operating expenses."
For full-year 2022, Clover Health is reaffirming
its previously provided guidance and commentary:
- Total revenues are
expected to be in the range of $3.0 billion to $3.4 billion. This
includes projected Insurance revenue of $1.0 billion to $1.1
billion and Non-Insurance revenue of $2.0 billion to $2.3
billion.
- Insurance
membership is expected to average 84,000 - 85,000, a growth rate of
26% - 27% as compared to the 2021 average. For the Non-Insurance
program, the Company expects the average number of aligned
beneficiaries to be 160,000 - 165,000, compared to an average of
62,125 in 2021.
- Insurance MCR is
expected to be in the range of 95% - 99%. This improvement versus
2021 is expected to be driven by a combination of expected
operational efficiencies, increased risk scores, and slightly lower
COVID-19 costs. Non-Insurance MCR is also expected to improve
versus 2021 levels. Any significant developments related to
COVID-19 and/or historical utilization trends could impact these
expectations.
- Adjusted Operating
Expenses (Non-GAAP)(1) are expected to be between $330 million and
$345 million.
- Adjusted Operating
Expenses as a Percentage of Revenue (Non-GAAP)(1) is expected to be
10% - 12% compared to 18% in 2021.(1) 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 as a Percentage of Revenue, the most directly comparable
GAAP measures, 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. 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.
Insurance MCR Cohorts by
RegionThis quarter we are providing information regarding
the Company's Insurance MCR by region in fiscal year 2021, which is
our most recent comprehensive data available, to demonstrate the
variations across our footprint.
Insurance MCR (GAAP) for Year Ended December 31,
2021 |
All Members |
106.0 |
% |
|
|
|
|
|
|
Incurred Insurance MCR
(Non-GAAP)(1) by Region for Year
Ended December 31, 2021 |
|
Incurred Insurance MCR
(Non-GAAP)(1) |
|
Member Weight(5) |
Northern New Jersey(2) |
99.3 |
% |
|
67.7 |
% |
Southern New Jersey(3) |
120.4 |
|
|
22.9 |
|
Georgia(4) |
99.9 |
|
|
6.2 |
|
Other |
103.8 |
|
|
3.2 |
|
All Members |
103.5 |
|
|
100.0 |
% |
(1) |
Incurred Insurance MCR (Non-GAAP) is a non-GAAP financial measure.
A reconciliation of Incurred Insurance MCR (Non-GAAP) to Insurance
MCR, the most directly comparable GAAP measure, 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. |
(2) |
The Incurred Insurance MCR (non-GAAP) presented reflects a weighted
average of premiums and claims associated with our members enrolled
in MA plans that we offer in what we describe internally as our
Northern New Jersey region. Our Northern New Jersey region includes
the following counties in New Jersey: Atlantic, Bergen, Essex,
Hudson, Mercer, Monmouth, Morris, Passaic, Somerset, Sussex, and
Union. We consider these to be our Northern New Jersey counties
based on the consistency of our plan design and maturity for the MA
plans we offer in these markets, which generally fall within the
geography of Northern New Jersey. |
(3) |
The Incurred Insurance MCR (non-GAAP) presented reflects a weighted
average of premiums and claims associated with our members enrolled
in MA plans that we offer in what we describe internally as our
Southern New Jersey region. Our Southern New Jersey region includes
the following counties in New Jersey: Burlington, Camden, Cape May,
Cumberland, Gloucester, Hunterdon, Middlesex, Ocean, and Salem. We
consider these to be our Southern New Jersey counties based on the
consistency of our plan design and maturity for the MA plans we
offer in these markets, which generally fall within the geography
of Southern New Jersey. |
(4) |
The Incurred Insurance MCR (non-GAAP) presented reflects a weighted
average of premiums and claims associated with our members enrolled
in MA plans that we offer in Georgia. |
(5) |
Determined by dividing the number of Clover's Insurance members in
the applicable region by Clover's total number of Insurance
members. |
Leadership Update
Year to date, the Company has significantly
bolstered its management team, making several key hires. During the
first quarter of 2022, Clover Health appointed Conrad Wai as Chief
Technology Officer and Joseph Martin as General Counsel.
Additionally, today Aric Sharp joined the Company as CEO of Value
Based Care.
Earnings Conference Call Details
Clover Health’s management will host a
conference call to discuss its financial results on Monday, May 9,
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.
Forward-looking statements are not guarantees of future performance
and you are cautioned not to place undue reliance on such
statements. 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," "guidance," "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 potential improvements in Insurance MCR,
Non-Insurance MCR, and operating expenses, and the statements
contained in the quotations of our executive officers, including
expectations related to Clover Health’s "progress towards
profitability" and potential improvements in our 2023 results,
including our Insurance MCR, Non-Insurance MCR, and operating
expenses. 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' 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 and its variants on Clover Health’s business and industry;
the adoption and usage of the Clover Assistant; the timing and
market acceptance of new releases and upgrades to the Clover
Assistant; and the successful development of our Non-Insurance
operations and the degree to which our offerings gain market
acceptance by physicians. Additional information concerning these
and other risk factors is contained in our latest Annual Report on
Form 10-K filed with the Securities and Exchange Commission (the
"SEC") on February 28, 2022, including the Risk Factors section
therein, and in our other filings with the SEC. The forward-looking
statements included in this release are made as of the date hereof.
Except as required by law, Clover Health undertakes no obligation
to update any of these forward-looking statements after the date of
this press release or to conform these statements to actual results
or revised expectations.
About Non-GAAP Financial Measures
We use non-GAAP measures including Adjusted
EBITDA, Adjusted Operating Expenses, Adjusted Operating Expenses as
a Percentage of Revenue, and Incurred Insurance 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 and 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 this
release, together with other important 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 physician
enablement company focused on seniors who have historically lacked
access to affordable, high-quality healthcare. Our strategy is
underpinned by our proprietary software platform, the Clover
Assistant, which is designed to aggregate patient data from across
the health ecosystem to support clinical decision-making and
improve health outcomes. We operate two distinct lines of business:
Insurance and Non-Insurance. Through its Insurance segment, the
Company provides PPO and HMO plans to Medicare Advantage members in
several states. The Company's Non-Insurance segment consists of its
operations in connection with its participation in CMS' Direct
Contracting model, which will transition to the ACO Reach model
beginning in 2023. Clover's corporate headquarters are in Franklin,
Tenn.
Visit: www.cloverhealth.com
Contacts:
Investor Relations:
Derrick Nueman & Ryan Schmidt
investors@cloverhealth.com
Press Contact:
Andy Robinson & Andrew Still-Baxter
press@cloverhealth.com
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS: SELECTED METRICS(in
thousands)
|
March 31,
2022(Unaudited) |
|
December 31, 2021 |
Selected Balance Sheet
Data: |
|
|
|
Cash, cash equivalents and investments |
$ |
722,844 |
|
$ |
791,194 |
Total assets |
|
2,679,894 |
|
|
950,804 |
Unpaid claims |
|
164,240 |
|
|
138,604 |
Notes and securities payable, net of discount and deferred issuance
costs |
|
19,947 |
|
|
19,938 |
Total liabilities |
|
2,190,081 |
|
|
411,487 |
Total stockholders' equity |
|
489,813 |
|
|
539,317 |
|
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands) (Unaudited) |
|
|
|
|
|
|
|
Three Months EndedMarch 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Revenues: |
|
|
|
|
Premiums earned, net (Net of ceded premiums of $119 and $124, for
the three months ended March 31, 2022 and 2021, respectively) |
|
$ |
278,169 |
|
|
$ |
199,376 |
|
Direct Contracting revenue |
|
|
594,898 |
|
|
|
— |
|
Other income |
|
|
1,312 |
|
|
|
949 |
|
Total revenues |
|
|
874,379 |
|
|
|
200,325 |
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
Net medical claims incurred |
|
|
861,722 |
|
|
|
214,420 |
|
Salaries and benefits |
|
|
69,091 |
|
|
|
66,024 |
|
General and administrative expenses |
|
|
57,697 |
|
|
|
38,618 |
|
Premium deficiency reserve benefit |
|
|
(27,657 |
) |
|
|
— |
|
Depreciation and amortization |
|
|
826 |
|
|
|
160 |
|
Other expense |
|
|
— |
|
|
|
191 |
|
Total operating expenses |
|
|
961,679 |
|
|
|
319,413 |
|
Loss from operations |
|
|
(87,300 |
) |
|
|
(119,088 |
) |
|
|
|
|
|
Change
in fair value of warrants payable |
|
|
— |
|
|
|
(85,506 |
) |
Interest
expense |
|
|
403 |
|
|
|
1,175 |
|
Amortization of notes and securities discounts |
|
|
— |
|
|
|
13,660 |
|
Gain on
investment |
|
|
(12,394 |
) |
|
|
— |
|
Net loss |
|
$ |
(75,309 |
) |
|
$ |
(48,417 |
) |
Operating Segments
|
|
Insurance |
|
Non-Insurance |
|
Corporate/Other |
|
Eliminations |
|
Consolidated Total |
Three months ended
March 31, 2022 |
|
(in thousands) |
Premiums earned, net (Net of ceded premiums of $119) |
|
$ |
278,169 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
$ |
278,169 |
Non-Insurance revenue |
|
|
— |
|
|
594,898 |
|
|
— |
|
|
— |
|
|
|
594,898 |
Other income |
|
|
271 |
|
|
— |
|
|
27,399 |
|
|
(26,358 |
) |
|
|
1,312 |
Intersegment revenues |
|
|
— |
|
|
— |
|
|
19,136 |
|
|
(19,136 |
) |
|
|
— |
Net medical claims incurred
and other medical costs |
|
|
268,126 |
|
|
593,999 |
|
|
2,628 |
|
|
(3,031 |
) |
|
|
861,722 |
Gross profit |
|
$ |
10,314 |
|
$ |
899 |
|
$ |
43,907 |
|
$ |
(42,463 |
) |
|
$ |
12,657 |
|
CLOVER HEALTH INVESTMENTS, CORP. AND SUBSIDIARIES |
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
ADJUSTED EBITDA RECONCILIATION |
(in thousands) (Unaudited)(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
Three Months Ended |
|
|
|
2022 |
|
|
|
2021 |
|
|
December 31, 2021 |
|
September 30, 2021 |
|
June 30, 2021 |
Net loss: |
|
$ |
(75,309 |
) |
|
$ |
(48,417 |
) |
|
$ |
(187,202 |
) |
|
$ |
(34,527 |
) |
|
$ |
(317,611 |
) |
Adjustments |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
403 |
|
|
|
1,175 |
|
|
|
412 |
|
|
|
413 |
|
|
|
1,229 |
|
Amortization of notes and securities discount |
|
|
— |
|
|
|
13,660 |
|
|
|
— |
|
|
|
13 |
|
|
|
8 |
|
Depreciation and amortization |
|
|
826 |
|
|
|
160 |
|
|
|
848 |
|
|
|
120 |
|
|
|
118 |
|
Change in fair value of warrants payable |
|
|
— |
|
|
|
(85,506 |
) |
|
|
— |
|
|
|
(115,152 |
) |
|
|
134,512 |
|
Gain on investment |
|
|
(12,394 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation expense |
|
|
40,640 |
|
|
|
42,713 |
|
|
|
31,181 |
|
|
|
46,803 |
|
|
|
43,026 |
|
Premium deficiency reserve (benefit) expense |
|
|
(27,657 |
) |
|
|
— |
|
|
|
61,967 |
|
|
|
20,761 |
|
|
|
27,900 |
|
Expenses attributable to Seek Insurance Services, Inc. |
|
|
1,374 |
|
|
|
3,020 |
|
|
|
4,542 |
|
|
|
3,735 |
|
|
|
2,739 |
|
Expenses attributable to Clover Therapeutics Company |
|
|
357 |
|
|
|
703 |
|
|
|
826 |
|
|
|
1,106 |
|
|
|
988 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
(71,760 |
) |
|
$ |
(72,492 |
) |
|
$ |
(87,426 |
) |
|
$ |
(76,728 |
) |
|
$ |
(107,091 |
) |
(1) |
The table above 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. |
(2) |
In first quarter 2022, we updated our definition and presentation
of Adjusted EBITDA (Non-GAAP) to exclude premium deficiency reserve
expense or benefit (PDR), gain on investment, and expenses
attributable to Seek Insurance Services, Inc. and Clover
Therapeutics Company from the calculation of this measure. PDR is
now being excluded because management believes PDR does not reflect
the Company's underlying fundamentals due to the significant
variability in PDR from period to period and because it is a
non-cash item, gain on investment is being excluded because it is a
non-cash item and management believes it does not reflect the
Company's underlying operations, and expenses attributable to Seek
Insurance Services, Inc., and Clover Therapeutics Company are being
excluded because management believes they are not reflective of the
Company’s operating expenses relating to its core businesses or its
actual recurring cash expense. Previously reported Adjusted EBITDA
(Non-GAAP) figures have been revised in the table above to conform
to the updated presentation. |
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESINCURRED
INSURANCE MEDICAL CARE RATIO (NON-GAAP)
RECONCILIATION(Unaudited)(1)
|
Year Ended December 31, 2021 |
GAAP Insurance MCR (All Members) |
106.0 |
% |
Adjustments |
|
Prior Period Development(2)(3) |
(2.5 |
) |
Incurred Insurance MCR
(Non-GAAP)(3) |
103.5 |
|
|
|
Incurred Insurance MCR
(Non-GAAP) By Region |
|
Northern New Jersey |
99.3 |
|
Southern New Jersey |
120.4 |
|
Georgia |
99.9 |
|
Other |
103.8 |
|
All Members Total |
103.5 |
|
|
|
Incurred Insurance MCR
(Non-GAAP) By Clover Assistant (CA)
Cohort(3)(4) |
|
2018 CA Cohort |
89.2 |
|
2019 CA Cohort |
93.4 |
|
2020 CA Cohort |
98.9 |
|
Aggregate CA PCP Cohort |
93.5 |
|
Non-CA PCP Cohort |
112.5 |
|
(1) |
The table above 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) |
Prior period development cannot be reasonably attributed to
specific Insurance members and, therefore, the reconciliation of
Incurred Insurance MCR to GAAP Insurance MCR is provided at the
total Insurance-member level only. We do not expect the impact of
prior period development would be material to the calculation of
Insurance MCR for any regional or Clover Assistant cohort over the
applicable period. |
(3) |
Figures presented differ from those included in our fourth quarter
2021 earnings release, reflecting our actual claims experience as
compared to the Company's estimates as of December 31, 2021. |
(4) |
Includes only returning members with primary care providers. |
CLOVER HEALTH INVESTMENTS, CORP. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP FINANCIAL MEASURESADJUSTED
OPERATING EXPENSES (NON-GAAP) RECONCILIATION(in thousands)
(Unaudited)(1)
|
Three Months Ended March 31, |
|
|
2022 |
|
|
|
2021 |
|
Salaries and benefits |
$ |
69,091 |
|
|
$ |
66,024 |
|
General and administrative
expenses |
|
57,697 |
|
|
|
38,618 |
|
Total Salaries and benefits plus General and administrative
expenses |
|
126,788 |
|
|
|
104,642 |
|
Adjustments |
|
|
|
Stock-based compensation expense |
|
(40,640 |
) |
|
|
(42,713 |
) |
Expenses attributable to Seek Insurance Services, Inc. |
|
(1,374 |
) |
|
|
(3,020 |
) |
Expenses attributable to Clover Therapeutics Company |
|
(357 |
) |
|
|
(703 |
) |
Adjusted Operating Expenses (Non-GAAP) |
$ |
84,417 |
|
|
$ |
58,206 |
|
|
|
|
|
Total revenues |
$ |
874,379 |
|
|
$ |
200,325 |
|
Adjusted Operating Expenses
(Non-GAAP) as a Percentage of Revenue |
|
10 |
% |
|
|
29 |
% |
(1) |
The table above 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 Adjustments
We believe it is useful to investors for our
presentation within this document of financial measures 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. In addition, we believe that the
presentation of these non-GAAP measures enhances an investor's
understanding of our financial performance.
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.
Expenses Attributable to Seek Insurance
Services, Inc. and Clover Therapeutics Company - This consists of
expenses incurred by the Company in the current period attributable
to Seek Insurance Services, Inc. and Clover Therapeutics Company.
These expenses are excluded from Adjusted Operating Expenses
(Non-GAAP) and Adjusted EBITDA (Non-GAAP) because management
believes they are not reflective of the Company's core businesses
or its actual recurring cash expense and therefore do not
appropriately reflect the Company's underlying fundamentals.
Gain on Investment - Gain on investment consists
of the gain recorded by the Company upon the completion by one of
its subsidiaries, Clover Therapeutics Company, of a private capital
transaction during the first quarter of 2022.
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 Incurred
Insurance MCR (Non-GAAP) to isolate our estimate of current period
performance.
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 discount, depreciation and amortization,
change in fair value of warrants payable, gain on investment,
stock-based compensation expense, premium deficiency reserve
expense (benefit), and expenses attributable to Seek Insurance
Services, Inc., and Clover Therapeutics Company. 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 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, and expenses attributable to Seek Insurance Services, Inc.
and Clover Therapeutics Company. 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, and expenses related to investments that management
believes do not reflect the Company's core operating expenses. 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.
Incurred Insurance MCR - A non-GAAP financial
measure that excludes from Insurance Medical Care Ratio (as defined
below) the impact of 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
medical care ratios of various cohorts of our members, excluding
the impact associated with adjustments made in the current period
relating to prior period dates of service.
Definitions of Other Items
Non-Insurance Medical Care Ratio - We calculate
our Non-Insurance medical care ratio (MCR) by dividing net medical
claims incurred in connection with our Non-Insurance operations by
Non-Insurance revenue in a given period. We believe our
Non-Insurance MCR 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 -
Insurance members and Original Medicare beneficiaries whose
providers or practices were live on the Clover Assistant on or
before March 31, 2022. 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) Insurance 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, which will transition to the ACO Reach model in 2023. We
believe that Lives under Clover Management is a useful measure of
the size of the beneficiary population managed by the Company.
Insurance Medical Care Ratio, Gross and Net - We
calculate our Insurance 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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