CLOV releases Q3 earnings; Beats estimates

Clover Health Investments Corp. (CLOV) released its third-quarter earnings for FY21 on November 8, 2021 after the market closed.

  • Revenue: $427.2 million vs $418 million expected
  • EPS: $ adjusted vs $0.31 expected
  • Net Income: $

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.

CEO’s Statement

“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
s 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.”

Analysts Estimate

The Zacks Consensus Estimate for loss per share was pinned at $0.31 which indicated an increase of 60.2% year-over-year. The estimated revenue was pegged at $418 million.

The Earnings Surprise Percentage (ESP) was pegged at 12.9% which indicated that the consensus estimated CLOV will beat its estimates

Earnings History

CLOV reported a slumped second quarter earnings FY21. The loss per share was $0.74 which had declined by a huge 7900% year-over-year. However, the revenue was $384.6 million which showed a growth of 109% year-over-year. The net loss was $317.6 million which showed a huge decline of 5978%.

The company’s reported revenue for the first quarter of FY21 was $200.3 million which showed a growth of 18% year-over-year. The net loss was $48.4 million which had declined by 71.9% year-over-year.

Future Forecast

Analysts estimate the loss per share for the fourth quarter to be $0.27. The Annual Forecast estimates the loss per share to be $1.43. The estimated revenue is pinned at $1.45 billion.

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