CLOVER HEALTH INVESTMENTS, CORP. /DE Q4 FY2024 earnings call

• 2024 was a pivotal year: Delivered meaningful full-year adjusted EBITDA profitability, surpassed 100,000 Medicare Advantage members with 27% year-over-year growth and 95% AEP retention rate, strengthened star ratings with over 95% of members in four-star rated PPO plans, and successfully launched Counterpart Health software business. - 2025 plans: Continue to maintain adjusted EBITDA profitability, invest in new member growth, Clover Assistant technology, expand Clover Assistant's reach, scale home care services, and focus on Counterpart Health's go-to-market strategy. The technology-first care model, Clover Assistant, and home care platform contribute to managing care and lowering costs, and the four-star rating will have a positive financial effect in 2026.

In 2024, Clover's insurance revenue grew. The fourth quarter insurance revenue was $331 million, and the full-year was $1,345 million, with 9% growth in both the fourth quarter and the full year. In the fourth quarter of 2024, the insurance benefit expense ratio (BER) improved to 82.8% compared to 87.4% in the same period of 2023, and the insurance MCR improved to 73.5% from 82.4% last year. For the full year 2024, BER was 81.2% and MCR was 75.1%, both showing more than 500 basis points year-over-year improvement. SG&A expenses were higher in the fourth quarter due to supporting the AEP season and quality-focused investments, but total SG&A for the full year 2024 decreased 7% year-over-year, and adjusted SG&A decreased 1%. The fourth quarter GAAP net loss from continuing operations improved by $46 million to a loss of $21 million, while adjusted EBITDA significantly improved to a profit of $8 million compared to a loss of $17 million in the fourth quarter of 2023. The full-year adjusted EBITDA was meaningfully improved by $112 million compared to 2023, achieving over $70 million.

• Insurance business revenue is expected to be between $1.8 billion and $1.875 billion in 2025. - Medicare Advantage membership is expected to average between 103,000 and 107,000 members, a 30% year-over-year growth at the midpoint. - Adjusted SG&A is expected to be between $355 million and $365 million. - Full-year 2025 adjusted EBITDA is expected to be between $45 million and $70 million. - Beginning in 2025, adjusted net income is guided to be between $45 million and $70 million. - Insurance BER for the full year 2025 is expected to be within the range of 87% to 88%. The 2024 results had elevated favorable prior period development that won't recur, new membership growth will impact adjusted EBITDA and net income, existing member cohorts show expanded profitability, and there will be increased variable and growth SG&A with investments in Clover Assistant Technology and Reach, offset by cost efficiency programs.

Factors that may cause actual results to differ materially from expectations are detailed in SEC filings, including potential market competition risks, challenges in member growth, and risks associated with technology implementation and business expansion.

Q: Hey, thanks for taking a question here. I guess, I know we are early in the Counterpart Health store, but kind of when can we start expecting to see some of the revenue metrics kind of show up into the financials? And what's your expectations for this year in terms of pipeline growth?

A: Hey Jonathan, thanks for the question. So regarding Counterpart, we are very excited by that business. We have a strong pipeline, as we said in the remarks. We are not yet saying when we're going to be incorporating that into the revenue and into the financial results. Of course, it's a newer business, as Peter said during his section. And the way that we're looking at it is that we are really looking at it as a way to expand reach first of all. So we're looking at bringing more lives under Clover management, which is a key KPI of ours, and under Clover Assistant management. Those economics will eventually become significant, we believe. But right now, of course, the core of the financials are being driven by the MA plan itself. So look for more announcements on launches, certainly look at more -- for more partnerships. We'll be talking a little bit more later this year, I think about how we see the lives growing under management and the clinical results. And then I think you'll see the financial side come a little later.

Q: Yes. Thanks. And then just on the G&A load kind of as it's a lot, it's a little bit higher than what we were thinking. I guess, how much is kind of the cost related to the AEP growth that you kind of saw? And then as we kind of think about 2026, it sounds like you're going to grow a decent clip. Are we going to experience that kind of a similar G&A pickup in relation to that? And how much do you think you can lop off via the G&A optimization efforts? Thanks.

A: Yes, thanks Jonathan. This is Peter. Also from an SG&A perspective, the growth SG&A is a significant portion of the SG&A growth year-over-year. Wanted to point out though that we already are scaling and having some leverage, right? So the guide at the midpoint for SG&A for 2025 represents about a 200 basis points improvement if you will if you measure SG&A as a percentage of revenue. But we do have growth expenses in there variable expenses, we're optimizing as well. And we think that for this year, our fixed SG&A is actually slightly down year-over-year. We are, of course, executing on an efficiency program, but directionally, from a growth going from 2025 into 2026, you would expect a similar direction, but I would say at a lower rate of increase.

Q: Hi. Thank you for taking our question. This is Tolf Cormanon for Matt Hewitt. Can you please provide some color on your expectations for continued growth? The home care arm in 2025 and beyond? Thank you.

A: Yes, absolutely. So this is highlighted as an area that we're very proud of. Our investment into care being delivered with Clover Assistant in the home, I think is an anchor stone of our entire strategy. Looking at the most expensive, most comorbid, most vulnerable members in that home care program is a critical aspect of how we do total cost of care control as well as improve outcomes. As such, we are planning to invest more into that arm. We are bringing that capability into new markets and expanding that team and expanding its capabilities and expanding its GR reach. So we don't have a specific guidance around that, but you should expect that to be a key part of our strategy and you see that total cost of care control flow into our financials as well.