Clover Health Investments(CLOV) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The Insurance MCR improved to 92.4% in Q4 2022 from 102.8% in Q4 2021, with a full year 2022 MCR of 91.8%, significantly better than 106% in 2021 [7][24][19] - Non-Insurance revenue grew 172% to $623 million in Q4 2022 and 256$2.38 billion for the full year 2022 [8][9] - Adjusted EBITDA for the year was approximately negative $298 million, an improvement from a loss of$344 million in the prior year [9][25] - The company expects 2023 insurance revenue to grow to between $1.15 billion and$1.2 billion, targeting an Insurance MCR of 89% to 91% [10][4] Business Line Data and Key Metrics Changes - Insurance revenue grew 34% to $270 million in Q4 2022 and 36$1.085 billion for the full year 2022, driven primarily by member growth [24][19] - Non-Insurance MCR improved to 103.4% for the full year 2022 from 105.7% in 2021, with a focus on reducing the number of participating physicians for 2023 [21][24] Market Data and Key Metrics Changes - Clover Home Care serviced over 3,300 members in 2022, contributing to higher member retention and satisfaction [6] - The company plans to increase its in-home practice panel to approximately 4,000 members in 2023, aiming to manage over $150 million in MA plan medical expenses [22] Company Strategy and Development Direction - The company emphasizes profitability over growth, expecting this strategic shift to position it for success in 2023 [4] - Clover Assistant is highlighted as a key differentiator, enabling early identification and management of chronic diseases, which aligns with CMS's proposed adjustments to Medicare Advantage [28][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the favorable performance trends and the impact of Clover Assistant on business operations [19][20] - The company anticipates a pivotal year in 2023, focusing on delivering shareholder value and achieving positive cash flows [39][40] Other Important Information - The company ended 2022 with$555 million in cash and investments, indicating a healthy liquidity profile [26] - Management noted that the overall SG&A expenses are expected to remain flat despite a significant revenue decline, with elevated SG&A typically seen in Q1 and Q4 due to broker commissions and marketing costs [15][43] Q&A Session Summary Question: Membership growth for 2023 and its impact on revenue guidance - Management indicated that membership on the insurance side is expected to be in line with the beginning of 2022, with approximately 55,000 aligned beneficiaries for the Non-Insurance side [41][42] Question: Drivers behind SG&A expenses despite revenue decline - Management explained that SG&A infrastructure is not significantly variable and remains flat due to the nature of the business [43] Question: Cash burn relative to EBITDA - Management stated that cash burn largely approximates EBITDA performance, with expectations for cash effects from the Non-Insurance line to manifest in Q3 2023 [46] Question: Impact of CMS coding changes on the business - Management believes that Clover Assistant's focus on diagnosis and care management will mitigate the impact of CMS changes compared to other plans [48][49]