Clover Health Investments, Corp.

Hello, welcome to our stock trades. Welcome to the most anticipated earnings season that we have here on our channel. Very excited to be here with you guys. Right on time. We're going to go ahead and make sure we're all good. Let me know if you guys can hear me. Very excited to have you. And without further ado, let's go ahead and go. All right, so... Make sure if you guys can help, please post this on the StockTwits, the Reddit page. I kind of messed up with the 2022 versus 2023 nomenclature of the title, but I went ahead and fixed that. I just got to fix the picture here, but we're going to go ahead and focus on what matters right now, okay? So the biggest thing that I want to focus on here, okay, biggest thing is You can go ahead and read on the bottom about what's happening. I want us to basically look at a video I posted two months ago, specifically, I don't know, December 30th, 2022. I went ahead and net income story, Clover Health, and I wanted to do a net income analysis. Okay. so this is 2021 give q you know this is uh q4 q3 q2 and q1 of 2021 and then we have q1 q2 q3 of 2022 but we don't have q4 and today is the earnings for q4 of 2022 so we're going to go ahead and we're going to listen to the earnings now for some reason they only have what clover stated they don't have what the analysts were asking So hopefully that gets fixed. You guys can enlighten me if you joined live. Again, I was busy in the clinic today. Okay. So overall, if you look at the 2021 net loss of Clover, they had $587 million. And then for 2022, when I made this video, we didn't know the losses. Well, because we didn't have Q4. Now we do. But if you went ahead and I said, if we analyze from Q1 to Q3 of 2021... we had $400 million loss approximately last year from Q1 to Q3. From Q1 to Q3 of this 2022 cycle, we had $254 million loss approximately, which basically shows you that Clover is headed in the right direction. Now, a lot of folks went ahead and said, well, Al, let's go ahead and let's wait for Q4 of 2022 because maybe it may come higher than normal. Well, ladies and gentlemen, today's the day. If we go ahead and go down to this beautiful box here and we go and look at the net loss here, If we go all the way to the right and highlight the net loss for this section, and we go all the way up to the up, we can see 2021's full year standing for FY is $587 million, which is equivalent to what basically we calculated here, okay? But here's the greatest thing. If you go ahead and look at the full year loss of 2022, you can see it was $338 million. And if you go ahead and graph that, you can see that Clover is decreasing their net income loss and they're slowly becoming profitable. This is exactly what I would like to see in a company that is a growth stock, but now is leveraging down to becoming a... profitable stock. Okay. So overall based off of these, I mean, honestly, I skipped everything. I didn't even give a crap about the net income. All I cared about is the net loss. Now let me go ahead and give you a, uh, good, uh, For all the people that are working in the industry, working in – or you're in a very high level of management, if you look at your top line revenue and you go down to your bottom line, which is technically supposed to be your net income, not net loss. They're going to replace this to net income soon. You want around a 20%. That means all the revenue that gets trickled down and when you have in the net income statement with the revenue subtracted from the cost of goods sold after the operational expenses have been subtracted, you basically get at net income and you want that to be 20% of the net, the whole revenue, okay? Okay. So to do that, what you can do is you can take this number, 587 divided by the full year revenue of 2021. And by doing that, remember it's a negative number because this is in parentheses. It's accounting principles. So if we put negative 587.8 and you divide that by 1472, you get 0.399, negative 39%. Again, we want 20%, okay? Now, if we go ahead and change this to this year's net income loss, 338.8, you're at negative 23%. which shows me that they're slowly trickling up. Okay. Again, an ideal company is anything over 20%. Obviously the gray areas between 10 to 20, anything under 10% is, is a company that, you know, it's a, uh, that it's in an area that's very competitive. Now we can go ahead. I've never shown you this analysis. Again, there's a lot of things you can look at, uh, but we'll go ahead and make a video about it and we can teach for it. Okay. So So overall, Q4 2022, the MCR was 92.4%, and the full year of 2022 MCR for the whole year is 91.8%. Again, I want to see near the 85% range, okay? Now, 2023 guidance insurance MCR range is anywhere between 89% to 91%, and the non-insurance MCR range is 98% to 100%. Again, strong liquidity expected to meet 2023 operating requirements, indicating to me with that sentence that they are not going to be doing a share dilution this year. Okay, we're going to go ahead and listen to the earnings report now. And then we can go ahead and make another video to go into the specific details. Now, first they went ahead and published a couple of slides. I just want to go over them really quickly to give you some opinions here. And you know, cause sadly no one's covering Clover and it's a shame. So we'll go ahead and give my, uh, opinion on the matter. So, uh, We're going to go ahead and talk about this. I want to just talk about things that we normally don't mention here. So MCR, as you can see, it's dropping down. The guidance now is anywhere between 89% to 91%. As you can see, potentially the Clover assistant is doing his job, compounded by the fact that the CFO is doing a lot of cuts. to, you know, be in line with profitable, essentially being profitable. Okay. So let's go ahead and keep going. All right. So let's see here. Okay, I'm gonna keep going here. Okay, so here it is, the 2023 outlook. If you go ahead and do that, you can see the revenue for 2023 is gonna be anywhere between 1.9 billion to 2 billion. Again, in our calculation, we've essentially taken off a billion dollars And we've already done this calculation because of what they're trying to accomplish. They're trying to essentially decrease their non-insurance MCR to bring that down to make it profitable and obviously improve on the insurance MCR. All right, let's go ahead. And again, goal, shareholder value, obviously, because if you look at the, if you go down here, and look at the cash they have, cash and cash equivalents on the selected balance sheet data that they provide. We're going to go over the whole balance sheet, not in this video, but understand that don't ever look at a company's selected data as some of it is going to be non-GAAP versus GAAP. We like to go ahead and look at the data directly from the SEC, right? But again, it's I don't know if they filed it already. Usually takes time for a brain machine to get it. Now, if you look at the cash, they went from $791 to $555 million. The one that I want to talk to you about, since we're talking about shareholder value, you can see that total stockholders' equity has drastically decreased. You know, duh, as they're losing cash as they're burning cash right now. Right. Another thing that I want to go ahead and quickly mention here is in terms of lives under management, we are obviously still in a positive increase. What we want to know, though, is how are they? And I told you 2023 is going to be the year where we're going to know exactly how these people stack up. Okay? We're going to know 2023 is going to be the year. Q1 of 2024 is going to tell me all I need to know about Clover. Q1 of 2024, a year from now, in a couple of months, I'm going to get all the information I need to know about Clover so I can accurately know what portion of that intrinsic value, that target sign we're creating, will come into fruition. Okay? So overall, the prioritizing profitability, that's the top focus. Again, if you looked at their paperwork in 2020, before they became a SPAC, they were talking about profitability. The market gave them slack. And now the market has punished them to a point where if they continue at the rate of what they're doing, they're going to get delisted. Hence why now we're seeing profitability here, profitability here. Profit, just a bunch of just profit. This is the message now. So overall, they want to improve margins. So essentially decreasing cost of goods, aka gross margins will go up. We're going to go ahead and it looks like hopefully they talk about their path to profitability. That'll be a little nice to see. We'll talk about this early treatment of diabetes. It's actually really important. When people get diabetes, they have this thing called non-enzymatic glycosylation. And what that basically is, is in your kidneys, you have two arteries. You have arteries going in and arteries going out. The afferent arteriole and the efferent arteriole. The artery that's actually going out when people get diabetes is Over years, that type of artery gets built up of this non-enzymatic glycosylation, which basically increases the rate of kidney failure, right? And they go ahead and talk about this chronic kidney disease in the next slide. You get also other problems, peripheral neuropathy and also eye problems. Anytime you have micro vessels getting smaller, you essentially go ahead and diabetes, unfortunately, is one of those diseases that affects every little organ, okay? It's a very nasty bugger. And if they can catch it early and do treatments, imagine if they can catch it earlier in the pre-diabetic version, okay? Now, again, personally, I want to know the opinions of all the doctors that are watching. Please comment down below. And for the doctors that are in our private stock terminal, please go ahead and comment down below and in our stock terminal because Clover Assistant helps track glomerular filtration rate. Now, again, for people that don't understand what GFR is, Very quickly, I can explain it to you so you don't have to watch a 30-minute, two-hour video determining what the hell that is. So the GFR is estimated... It's a complex equation. You can go ahead and estimate. Every ethnicity has their own estimation. There's higher rates of kidney disease in different parts and different portions of the population. And different races have a different form of an equation that gets factored in. And based off of this calculation, you estimate the degree of how well your kidneys are perfusing. Now, when you go ahead and stage someone for kidney disease, there are levels. And the levels are essentially as follows. The GFR range is over 90. This is honestly a terrible staging system. I like this one. So anything above 90 is stage 1. 60 to 89, stage 2, et cetera, et cetera. You want to go ahead and most nephrologists prepare for hemodialysis here. And then after here, that's when they go into the hemodialysis. And please correct me if I'm wrong. I'm a medical student. I'm still learning. But that's pretty much what my understanding is. So overall, and this is not a lecture about nephrology. This is just trying to explain to you Personally, for me, Clover Assistant helps track GFR. Well, that is not impressive to me because I use Cerner, and Cerner helps track GFR. Epic, I just use Epic. And Epic, essentially, which uses the same platform that Clover Assistant was, you know, spawned on, they track GFR. So the tracking of GFR... It's not like, oh my God, this is some revolutionary thing. I think, you know, I would love for the company to, you know, Clover to show me like what's special with their tracking system of GFR that's different than the GFR of, you know, tracking the other one, right? Is it, you know, a way to... Are they collaborating an AI type approach that basically tells you that, Hey, this is about to go down. We should do this. I don't know, but they need to communicate it. But when a member's GFR declines to a certain range, Clover assistant prompts the PCP to consider CKD stage three, maybe, maybe. Cause again, you remember stage three is anywhere between 45 to 59. Okay. maybe the Clover assistant may see a decline from like 70 to like 60 or something. And then perhaps then it might Clover may say, Hey, go ahead and consider chronic kidney disease. But guys, it's very simple. The GFR is already calculated. And if it's, If it's under 59, ladies and gentlemen, it's already stage three. It's not rocket science, right? So I don't know at what levels do they prompt the physician that, hey, this is stage three. But based off of this in terms of kidney functionality, and they have a star here as it's measured via GFR, right? you can see that the Clover Assistant increases and helps the kidney function better because of its ability to track. So obviously they have data that suggests this. Now, personally, as a scientist, I would like to know the standard deviation error bars, if I may explain to you what I'm talking about. standard, deviation, error bars. you can know what I'm talking about. You see these bars here. Oh, here, here, here's a good one. You see these bars here. These bars tell me if this is this, you know, if this is statistically significant, are these changes statistically significant? So again, Clover assistant help, you know, PCP identifying CKD earlier and disease, you know, I just, I want a little bit more data. I want to know how they're doing this. Why what's different from Cerner and what's different from Epic? Because if I was a family medicine doctor right now, I want to know why should, you know, what's so special about you guys rather than just me keeping my EMR system, okay? Electronic medical record. Again, I'm not trying to be annoying here. I'm just giving you some insights from my experience. And for all the doctors, you guys are all like, yeah, yeah, yep, yep, exactly, right? Because it's an honest question, okay? All right, so I hope they can answer that. And here's, you know, here's my, you know, my electronic medical record asking me to download, you know, Citrix. All right, so let me just go ahead and quickly... Okay, so there it is. There's a quick overview of the PowerPoint. Now, after this, we're going to go ahead and listen to the earnings report. So overall, I'm going to go back up here. We posted this... One of our stock group members posted this yesterday at 8.40 p.m. yesterday. And he said essentially what he did is he was doing some due diligence on Clover. And one of our members, I think he posted it. We had a lot of discussion today in our – I can't wait to read it all – Yes. So one of our members here, Global Minded. So one of our members posted about it and then Global Minded said, forgive me for my ignorance. No, no ignorance. This is very hard stuff. So please ask questions because that's an important question. So overall, these are for your options, people that like to trade. The straddle costs $21. So what this does is you can look at any stock. It basically analyzes and uses implied volatility. Now, for all the options, people out there are like, yeah, yeah, I know implied volatility. It uses that and it estimates the next earnings report movement. So it estimates it. And the estimated earnings report movement that our stock terminal was able to calculate was 16%. So if you go ahead and go to Clover, But a closed stock, we're literally, and to be quite frankly honest, we hit near 16% today, if you don't remember. We went up high, but overall 15%. So we were definitely close. And this is very nice for option traders and people that want to make, again, you know, definitely have at least five years in the market, right? This is something that is very difficult to understand, right? It's very risky. Okay, so let's go ahead. Without further ado, let's remove this and let's share and let's listen to the earnings report together. Entire screen. All right, so let me know. I'm going to drink some water. All right. Let me know if you guys hear this. I'm going to mute myself. Please let me know if you hear this.

Chief Financial Officer.

Good morning, ladies and gentlemen, and welcome to the Clover Health fourth quarter and full year 22 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the prepared remarks. At that time, if you wish to ask a question, please press star one on your telephone keypad. As a reminder, today's call is being recorded. I would now like to turn the call over to Ryan Schmidt, Investor Relations for Clover Health. Please go ahead.

Good morning, everyone. Joining me on our call today to discuss the company's fourth quarter and full year results are Andrew Toy, Clover Health's Chief Executive Officer, and Scott Leffler, the company's Chief Financial Officer. You can find today's press release and the accompanying supplemental slides in the Investor Events and Presentations section of our website at investors.cloverhealth.com. This webcast is being recorded, and a replay will be available in the Investor Relations section of the Clover Health website. I'd also like to caution you that we may make forward-looking statements during today's call that are subject to risks and uncertainties, including expectations about future performance, factors that may cause actual results to differ materially from expectations that are detailed in our SEC filings, including in the risk factor section of our 2022 annual report on Form 10-K. Information about non-GAAP financial measures referenced.

It's great to be here today on my first earnings call as Clover's Chief Executive Officer. This morning, I'm pleased to share our strong results for 2022, highlighted by insurance MCR improving over 1,400 basis points compared to 2021. This improvement in MA plan MCR reflects the continuation of the favorable performance trends we experienced throughout the year. Most importantly, our results highlight Clover Assistant's impact on our business, and I'm excited by the data showing our technology's clear ability to empower Medicare physicians to identify and manage chronic diseases earlier, which I'll discuss in more detail shortly. In 2022, we emphasized profitability over growth. This strategic shift impacted both the insurance and non-insurance lines of business. We expect the combination of improved 2022 insurance results and the enhanced strategic emphasis on profitability over growth to position us for a successful 2023, as we demonstrate the strength of our approach to Medicare and deliver significant progress towards profitability. As a result, we're also pleased to reiterate and expand upon the partial guidance for 2023 that was issued last month. Let's start with our insurance segment, where throughout 2022, we delivered favorable results in both MCR and revenue. We're proud of our full-year insurance MCR of 91.8%, which was better than our most recent 2022 guidance and is reflective of the continued improvement in core insurance operations and the value derived from Clover Assistant. Clover Assistant underpinned our differentiated offering in the market, high-value plans at low costs on a wide network. Through our unique approach, we've proven our ability to grow, and as we prioritize profitability, we believe the moat afforded by Clover Assistant will allow us to flip the switch to sustainable, industry-beating growth once we've established core profitability. As an additional reminder, we were paid on three stars during 2022, so our results are not yet reflective of the favorable impacts that we will enjoy.

I'm going to go ahead and repeat that section for a sec, guys.

...from being paid on three... as we demonstrate the strength of our approach to Medicare and deliver significant progress towards profitability. As a result, we're also pleased to reiterate and expand upon the partial guidance for 2023 that was issued last month. Let's start with our insurance segment, where throughout 2022, we delivered favorable results in both MCR and revenue. We're proud of our full-year insurance MCR of 91.8%, which was better than our most recent 2022 guidance and is reflective of the continued improvement in core insurance operations and the value derived from Clover assistance. Clover Assistant underpins our differentiated offering in the market, high-value plans at low costs on a wide network. Through our unique approach, we've proven our ability to grow, and as we prioritize profitability, we believe the moat afforded by Clover Assistant will allow us to flip the switch to sustainable, industry-beating growth once we've established core profitability. As an additional reminder, we were paid on three stars during 2022, so our results are not yet reflective of the favorable impact that we will enjoy from being paid on three and a half stars for our PPO plan beginning this year. We also announced in the fall that we were awarded a three and a half star rating for all of our plans for 2024. The combination of our strong 2022 insurance results.

So also I wanted to go ahead and communicate to 3.5 star ratings goes into effect, three stars. Exactly. So that's right on Brandon. Absolutely. Absolutely.

Our PPO plan being paid on three and a half stars and the ability to improve care through clever assistance positions us well for an even stronger 2023, where we are initially guiding to an insurance MCR range of 89% to 91%. For our non-insurance business, during the full year 2022, MCR of 103.4% improved compared to 2021. While we did improve, this is not the result we are satisfied with. As discussed on previous calls, we strategically reduced the number of participating physicians in the program for 2023, which resulted in a reduction in aligned beneficiaries under the program. By focusing on providers who are more closely aligned to our approach, we expect MCR in 2023 to improve to a range of 98% to 100%.

This is very clear, so I'm just going to point the camera right here at me, guys. This is very clear. We're going to go, obviously, back to the recording, but the whole point here is to break this recording down. So he said something really interesting right here, and I want to take the time to massage it really quickly. He specifically stated... that we essentially, in layman's terms, dropped off a lot of physicians that weren't in line with, or at least kept physicians that were in line with the Clover Health, Clover Assistant value. Now, I bet you, There were probably some physicians out there that were like, whatever, I'm just going to use this and I'm going to use the Clover Assistant and I'm going to get my premium because I'm using it because they pay a little bit more if you use it. But Clover really wasn't benefiting. as they weren't maybe using it correctly. Maybe they didn't have a lot of Clover health patients. Maybe they weren't doing X, Y, and Z. I don't know, right? But regardless, the doctors that are burning the cash, a lot of cash on Clover and that are just really just sucking Clover to extinction are going to be dropped and they drop them. which is why most likely we've seen, I believe, Belize 2025, our amazing stock terminal member, amazing gentleman. looks at the CMS, who jumps on and who jumps off regarding CMS. And every month is different because there's a certain criteria of when you can join, and then you have to hold off a couple of months, and then you can change. We could talk about that for people that are interested, but we've seen quite a bit of a drop. We were a little bit worried about But in the back of my mind, how do you achieve profitability if, sadly, you keep the physicians that are burning a lot of cash and they're not adding to the Clover value? So I guess in layman's terms, Mr. Seedless Green here, you know, yeah, trimming the fat. We're just trimming off so we can, you know, dissecting it, cleaning it up so we can achieve a very sexy MCR, which will lead to a beautiful profitability, increase gross margins, increase the bottom line, and most importantly, of course, Increased feature-free cash flows, which can be discounted and projected and can be calculated. And that's how businesses are made. So let's go back to the lecture here, to the earnings report.

Another area we're really excited about is Clover Home Care, which is a part of our insurance business operations. Clover Home Care, our internal primary care practice, drives significant clinical value by delivering in-home care directly to our most vulnerable members.

I'm sorry, I didn't hit the mute button. I'm going to restart that. I don't know if you had some distortion.

Insurance business operations. Clover Home Care, our internal primary care practice, drives significant clinical value by delivering in-home care directly to our most vulnerable members. In 2022 alone, we serviced over 3,300 members, receiving great feedback and high member satisfaction, which we believe also contributes to higher member retention. These members are some of our most medically complex, often with multiple advanced comorbidities and high institutional claims. For this cohort of Clover members, we're focused on home-based supportive care models, including palliative, that enable our most complex members to receive the care they need at home rather than in a hospital. When measured against other eligible but not enrolled members, we see near-term meaningful cost reductions for members enrolled in the program. And these cost reductions come primarily from lower institutional claims. That's why in 2023, we plan to increase the size of our in-home practice panel to approximately 4,000 members and thereby increase our MA plan medical expenses under home care management to more than $150 million. With that, I'll now hand over to Scott for the financial update. rather than in a hospital. When measured against other eligible but not enrolled members, we see near-term meaningful cost reductions for members enrolled in the program. And these cost reductions come primarily from lower institutional claims. That's why in 2023, we plan to increase the size of our in-home practice panel to approximately 4,000 members and thereby increase our MA plan medical expenses under home care management to more than $150 million. With that, I'll now hand over to Scott for the financial update.

Thanks, Andrew. The Clover team's hard work is resulting in increased momentum across the business. I'll first cover the fourth quarter and full year 2022 financial highlights and then review our outlook for 2023. As Andrew mentioned, fourth quarter and full year 2022 financial results were highlighted by significantly favorable insurance MCR performance and strong insurance revenue growth. We also continued to moderate year-over-year adjusted SG&A growth as compared to 2021. For the insurance segment, MCR improved to 92.4% this quarter from 102.8% in Q4 of last year. This result was driven by the continued maturation of our portfolio and insurance operations, as well as reduced COVID-related expenses. Our full-year insurance MCR demonstrated a meaningful improvement over a more extended time period, with full-year 2022 MCR of 91.8%, improving significantly from 106% in 2021. We believe that these improvements are a reflection of our focus on expanding Clover Assistant capabilities and reach, building best-in-class insurance operations, and the added benefit from medical assistance transnormalizing compared to 2021.

Exactly. So he said something really important right now about expanding Clover Assistant, but doing so in a way that is obviously in line with their mission of profitability. Exactly.

As we've mentioned in the past, we did experience some favorability from prior periods as well. During the fourth quarter, insurance revenue grew 34% to $270 million. For the full year 2022, insurance revenue grew 36% to $1.085 billion. For both periods, member growth was the primary driver.

Exactly. So insurance growth is obviously growing above industry standards, which is what you want to see. So that's actually really good. This 30-34% business is definitely intriguing.

Uninsurance MCR during the fourth quarter was 103.6%, slightly elevated compared to Q4 of 2021 MCR of 103%. Full year 2022 non-insurance MCR of 103.4% was a better result compared to our MCR of 105.7% in 2021. Having said that, I'll reiterate Andrew's comments that our broader priority in 2023 is to deliver positive growth profit for this line of business

Exactly. Personally, Mr. Scott, I would like to see a bit of an explanation on why that increase. But again, you went ahead and pretty much said that the main focus for 2023 is going to be profitability and helping decrease MCR, which is very clear, as we can see, there's a billion dollar difference in your revenue that's going to happen in future guidance of 2023. But we're going to see right now slowly when we get to that profitability. And for the folks that are watching, you know, recently Palantir got to that profitability range and the stock shot up. Obviously, it cratered back down, obviously still up rather than it being around the $5 region or $5 to $6 region it was trading on recently. But overall, once a stock hits profitability, it is obviously looked at differently by Wall Street, which is really cool for retail investors because they're able to kind of look for those companies. But the problem is, is how do you know if it's going to be successful? And that's where you really got to dig deep into it and really take the time. All right. So let's go ahead and go back.

We believe that our strategic shift for the narrower base of providers positions us to do so. For the fourth quarter, non-insurance revenue grew 172% to $623 million. During the full year 2022, non-insurance revenue grew 256% to $2.38 billion. Year-over-year revenue growth was primarily driven by growth in aligned beneficiaries. Favorability in the program's benchmark also contributed to stronger Q4 revenue, which was offset in our NPR results by higher total cost of care for aligned beneficiaries.

All right. So quickly, I wanted to just go ahead and mention something important and then we'll go back. If you're liking this video, very simply put, I want you to click that like button. I don't really ask for a lot in terms of just if you can smash that like button, smash the shit out of that like button. And don't forget to subscribe if you haven't done so. But that wasn't the important message. The important message is so. I just finished the surgery rotation and now I'm doing family medicine. And by golly, guys, I'm really enjoying family. It's really nice. The people are so humble. They're great to work with. It's a nice environment. And I'm working on with a private practice, you know, obviously gaining that experience. And there was a, without disclosing too much information, there was a business meeting and I was able to see this business meeting and I was able to hear and ask questions regarding this business meeting of a private practice family medicine primary care group. And I would like to share with you my experience on the matter. So beautifully, I was nodding my head as they were talking how direct contracting is now being shifted into ACL. And I was, mm-hmm, mm-hmm, right? And we already know that for all the Clover people here, right? And because of that, a lot of physicians, the way they're being made money now, before it was, I got to see a lot of physicians. Sorry, I got to see a lot of patients, patients, patients, patients, right? And now it's there being majority of their pay, I would say around 40, 60% of their pay is going to be geared with a couple of criteria. Can a physician help their patients decrease their A1C? can a physician help decrease their high blood pressure? If a patient goes to the hospital and then gets discharged, can the primary care physician see them in within a 14-day parameter? That's important because if you see your patient within 14 days since being discharged from the hospital, they are going to have a lower readmission rate. What is a readmission rate? Very simply put is essentially when a patient gets discharged from the hospital, some of them, especially certain groups have a high probability of coming back to the hospital. And as an insurance company, what do you want? Do you want your patient to go back to the hospital or to their primary care doctor, which is the one that's cheaper? You already know the answer. Okay. The family care doctor. So what's happening now is Clover is obviously cutting off the doctors, trimming the fat, if you may, in respects to Mr. Seedless Green's comment. And what they're doing is they're focusing on just like how physicians now are going to be focusing on. not taking care of too many patients in terms of overloading their schedule, but focusing on the quality of care, care that is going to hopefully add more motivational learning to help decrease A1C levels, which is a measurement on your glycosylated levels of your hemoglobin, your red blood cells, where we can measure how much sugar you've been eating, right? And we want that to go down, right? Uh, preferably, uh, below a five, right? Uh, you know, we were okay with 5.5, but preferably below five, right? Uh, non-medical advice, right? But, uh, if we have patients that are in the seven, seven, seven region, eight region, and even higher, that's not good. Insurances are not going to want to go ahead and pay you more for that. So that's kind of where the healthcare system is going and Clover's on top of that. And now Clover's trimming the fat. Okay. Let's go ahead and go back.

Fourth quarter adjusted SG&A was $86 million and full year 2022 adjusted SG&A was $321 million. Moderating adjusted SG&A remains a focus for us as we push towards profitability. Adjusted EBITDA for the fourth quarter was negative $81 million compared to a loss of $87 million in the prior year period. Adjusted EBITDA for the year was approximately negative $298 million, which is an improvement compared to the loss of $344 million during the prior year. At the end of 2022, our restricted and unrestricted cash, cash equivalents, and investments totaled $555 million on a consolidated basis and $332 million at the parent entity and unregulated subsidiary level. These balances were impacted during Q4 by the normalization of the $96 million working capital benefit referenced on our last earnings call and the $50 million DCE provisional settlement for 2021. While we always consider opportunistic financing, given our current healthy liquidity profile, I'll reiterate what we have said in the past, which is that the company expects to have adequate liquidity for 2023. In addition to our strong liquidity position, more broadly, we have a solid and unlevered balance sheet, which should provide opportunities for future sources of liquidity if needed. Nonetheless, our objective is to accelerate down the path of profitability and achieve positive cash flows in order to avoid dilution to our shareholders.

I'm still chewing on ice. That's very important. For me to stop chewing on ice, that's a big deal. Let's go ahead. Let's restart that. He said something really important that made my hair on my skin go up. Okay.

All right. In addition to our strong liquidity position, more broadly, we have a solid and unlovered balance sheet, which should provide us

A solid balance sheet. Okay, good. I would not call it solid, Scott. It obviously needs to be profitable, but it's okay. He's going to say something very exciting right now.

Opportunities for future sources of liquidity if needed. Nonetheless, our objective is to accelerate down the path of profitability and achieve positive cash flows in order to avoid dilution to our shareholders.

very clear we're going to accelerate to profitability and increase positive future free cash flows so they have money that's in the statement of cash flows that can essentially go to their net losses when need be so they don't have to dilute shareholders Ladies and gentlemen, we have been waiting for this for such a while. And now we're slowly going to get into that juiciness of a business that's going to be self-sustaining. Now, again... part of our mastering course, which you'll see, you have different sections on how to calculate intrinsic value calculations within companies. Now, normally, as I told many of you guys in our bi-monthly meetings, we normally see companies that go from negative free cash flow, negative net income, stage one, let's call that stage two, to positive free cash flow, negative net income, and then stage three, positive free cashflow, positive net income, okay? So let's go ahead and listen. Oh yeah, you're chewing ice too? Chewing ice together.

Finally, I'll provide an overview of our full year 2023 guidance. We expect to continue to grow top line revenue for the insurance line of business to between 1.15 billion to $1.2 billion. with a heightened focus on profitability, targeting an insurance MCR of 89% to 91%. We expect the reduced scale of our participation in the ACO REACH program to result in improved non-insurance MCR of 98% to 100%, and revenue of $0.75 billion to $0.8 billion. We estimate that adjusted SG&A will be between $315 million and $325 billion. Full year adjusted EBITDA is expected to improve significantly to between negative $155 million and negative $205 million. In summary, we delivered strong insurance performance during both the fourth quarter and full year 2022, and are excited about the impact that our strategic emphasis on profitability for both lines of business will have on 2023 performance as we look to build upon the positive momentum for 2022. Now I'll turn the call over to Andrew for some final comments.

Thank you, Scott. To close, I want to emphasize the progress we're making with Clover Assistant, powering our differentiated approach to Medicare. Clover's technology-centric model is all about helping physicians with the early diagnosis and early care management of chronic disease, an approach that we believe closely aligns with CMS's recent proposed adjustments to Medicare Advantage. With the 2024 advance notice, CMS has adjusted plan incentives to remove risk adjustment diagnoses that it believes do not predict future costs. Because of these MA rule changes, we expect to see many large established plans have to change the way that they have been operating and have to fundamentally rethink their approach to MA. On the other hand, at Clover, we have always said that the focus of MA should be on allowing doctors to both improve outcomes and lower costs. And this is precisely why we developed Clover Assistance, which is designed to help physicians with the early identification and early management of those conditions that most impact the member's health and consequently the cost of care. Indeed, we're seeing that through this early identification of chronic disease, Clover Assistant can change the course of care. For example, our recent data shows that in a population with no documented history of diabetes, Clover Assistant was able to identify for the physician those Clover members at higher risk of the disease. And diabetes was often then evaluated, diagnosed, and medication prescribed. This is exciting to us because our data demonstrates

Okay, that's really cool though. Now explaining that data set, that's definitely interesting. If no documented history of diabetes, they come in and then boom, shakalaka. Okay, good. Again, a doctor could pick it up if they look, but unfortunately doctors are very busy and they got 10, 15, 20 minutes, 10, 15 minutes per patient, 25 patients a day, writing notes. and then making sure to keep up on all the other patients that go to the hospitals, get test results back, and all these other things, and interpret the test results, they might miss some things. So that's definitely, if it can definitely help, then of course, it's going to be in line with ACO. Now, personally for me, I would want a doctor, when I know there's MDs in Clover, to be on this earnings call, to talk about from their medical experience how this is being impactful. Not only will this be good for the investors of Clover, but specifically it'll also be good for the physician and people in the medical field investors as well. There's a lot of physicians invested in this company. as well as medical students and healthcare providers, nurses. And it'll be nice to hear an MD being able to be on these calls to talk about the diabetes and how that's important and give not only evidence-based medicine, but also anecdotal uh, uh, you know, uh, evidence, uh, uh, expert opinion, which is technically not the best form of, um, opinion, but it's always good. Okay. So let's go ahead and do that.

That Clover assistant can positively influence physician behavior, lead to earlier diagnostic interventions and help with early disease treatment. You can find a visual representation of our data in the accompanying Q4 supplemental slide deck. I'm very excited to share more as the year progresses, but with that, let's take questions.

The floor is now open for your questions. First, we will take questions from Clover's research analysts. If you wish to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself from the queue by pressing star 2. In the interest of time, we ask that you please limit yourself to one question and one quick follow-up. Thank you. We'll take our first question from...

I'm sorry, Richard Close with Canaccord Genuity. Thank you, and good morning. This is Will Hoover on for Richard. So you ended the year with roughly 89,000 MA members. In the past, you provided MA and non-insurance member and guidance, but it wasn't included. How should we think about the membership growth for 2023, and is that baked into your revenue guidance? Thank you.

Yeah, thanks for the question, Will. So you may recall that when we issued preliminary guidance in early January, we did make a comment relating to the membership on the insurance side of the business coming out of AEP. And we indicated that it would be in line with our membership at the beginning of 2022. And we don't have any update on that front. And then in terms of the aligned beneficiaries under the non-insurance side of the business, we're expecting that to be approximately 55,000 live coming into 2023. And yes, both of those reference points are reflected in our guidance.

Thank you. Thank you. Again, if you would like to ask a question, please press star one. Our next question comes from Jason Casola with Citigroup.

Hello. Good morning. Thank you for taking my question. You have Ben Rossi on here for Jason. So thinking back on 2023 guidance, we're seeing that you have SD&A flat despite revenue coming down over 40% year over year. Would you walk us through some of the drivers behind that expense and how we should be thinking about payments over the course of the year? And then are you forecasting some increases to SD&A as you expand your home health offerings?

Sure, thanks for the question. So first of all, I'll remind you that the overall decrease in revenue that we're guiding to for 2023 relative to 2022 is really driven exclusively by the non-insurance side of the business. And as we mentioned on our last call, there isn't, when you look at the SG&E infrastructure of the company overall, There isn't a significant proportion of our SG&A that is exclusively dedicated to that side of the business, and nor is it generally variable such that it would vary in relation to the number of aligned beneficiaries. So that's why you're not seeing a decline in the overall SG&A level that we're guiding to. I think part of your question was just around how does it sequence out during the year. And generally from an SG&A seasonality standpoint, we do usually see elevated SG&A in Q1 as a result of broker commissions that we incur coming out of the prior year's AEP cycle. And then we usually have some amount of elevated SG&A in Q4 as well related to some of the marketing costs associated with the next AEP cycle.

Got it. Thank you. And as a quick follow-up, just seeing the DCE PMPMs were stepping up quarter over quarter pretty high. Just any commentary on the drivers behind that?

Yeah, I would characterize that as kind of a rising tide effect. You know, on the revenue side, we saw some favorable movement in the relevant benchmarks that drive PMPM revenue. But then similarly, we also saw increases in total cost of care on our claims experience for aligned beneficiaries. And so the two moving in tandem have the effect of increasing both revenue and MedEx. But as you can see, there wasn't a significant change in the overall NCR performance for that line of business. Got it.

Thank you. Thank you. Our next question comes from Kevin Fischbeck with Bank of America.

Great. Thanks. I appreciate the comments about liquidity for this year. Is there some way to think about how the company's cash burn looks relative to an EBITDA number? So if you're going to

lose 150 million dollars what does that mean just as a kind of rule of thumb as far as how much cash we'd expect you to go through generally i would say that our cash burn largely approximates our ebitda performance just with the important caveat that the working capital cycle for the non-insurance line of business is kind of disconnected from the the p l by several quarters and so the performance of the non-insurance line of business in 2022, you'd expect to see the cash effect of that. We're expecting to see that in Q3 of 2023 when we expect to settle on the 2022 performance.

Okay, that makes sense. And then I guess maybe just going back to the comment about the MA rate and the coding dynamics, I understand you guys have a more integrated coding you know, sophistication and that the physicians are actually doing the coding and actually intervening around the coding that they're documenting. But it still would feel to me like any change around how much CMS is paying for coding would still potentially at least have a disproportionate impact to you guys, because you are good at documenting everything. You made it sound like if the industry was to see a 3% headway from this, that maybe Clover would see Am I interpreting that correctly, or are you saying that even if it is a bigger impact to you, it wouldn't change the way that you run your business?

Yeah, that's a great question there. A slightly different version than either of the ones you just said, but good query. I think what we're saying is we're certainly impacted because there's a lot of places where the rules have changed. ICD-9 is going to ICD-10. There's a lot of adjustments. However, we feel like overall, because we have collaborative assistance, we've always been focused on the diagnoses where there's also care management involved, which is the spirit of what CMS is doing. And so we feel pretty good about that. If you look at some of the, I think, impacts that are just coming out from other plans, maybe risk-bearing providers, we think they are significantly more impacted than what is in their CMS projection, significantly more, and that's because they're just has been somewhat of a prevalence of, we believe, coding for diagnoses that may not impact the cost of care, just like CMS sees. So any provider or plan which is getting a disproportionate number of those diagnoses would, we believe, would be significantly more impacted than what's inside a CMS projection. I think that's what we were intending to say.

Okay. But do you think that you're more or less in the industry?

We think we're going to be better than industry. We obviously don't know what's in every other plan, but we do know sort of like when you look at plans who are heavily delegated downstream to some of these providers, if you're heavily delegated to a provider downstream, and we do very little delegation because we rely on a clover assistant, a lot of those downstream delegations risk-bearing providers will be those likely who are doing more of that other kind of coding. So plans that are reliant on those kinds of services or those kinds of contracts will probably have to redo those contracts or will have some of those impacts flow upstream. So we do believe that we are less impacted, but we're not saying that we are not impacted. But because MA is a relative business, What that means is that as we all go out to bid, we are all looking at our future performance. We believe that that relative performance and advantage relative to other plans will likely bear out such that we can probably have a bit of an advantage going forward.

Yeah, it looks like Andrew Choi is slamming the desk. He's giving me Alex Karp vibes there. If you guys know, you know.

All right, great. Thanks. Thank you. Once again, if you wish to ask a question, please press star one at this time. We'll pause just a moment to allow questions to queue.

Yeah, I'm surprised. Not a lot of questions.

At this time, we have no further questions in queue. I would like to turn the call back over to Andrew Toy for any additional or closing remarks.

Sure, thanks. So yeah, to close out, I just want to reiterate that 2023 will certainly shape up to be a very pivotal year for our business. And we're absolutely focused on delivering shareholder value as our priority. So for that value, we'll deliver this by executing on our path to profitability. We've said that many times. We're going to continue widening our technology mode.

We said that many times because shareholders were very clear and Wall Street was very clear. If you ain't profitable, we're done with you. So he's like, we said that many times. But he also, I'm going to rewind, said something really important right now. And he said something with the word M-O-A-T, moat. For all of our Stock Terminal members, we have a wonderful person named Dish. on our group there. And yes, moat. It's what we've all been talking about. And hopefully throughout all the people that have been watching this channel, we are starting, you know, you guys are hopefully seeing the light at the end of the tunnel. And, uh, if you don't see it now, don't worry. Um, you know, it, it, it'll come, you know, this light's a little slower than the normal, uh, speed of light, which is what three times 10 to the nine. I forget. Let's see. Let's go back to, uh, Mr. Tory here.

And we're absolutely focused on delivering shareholder value as our priority. So for that value, we'll deliver this by executing on our path to profitability. We've said that many times. We're going to continue widening our technology mode. We just discussed why that's so critical and helps us be resilient against changes that are coming into the industry. And of course, by improving clinical outcomes for our members. So thank you, everyone, for joining us today. I look forward to updating you on our progressions throughout the year.

This concludes today's Clover Health fourth quarter and full year 2022 earnings call and webcast. You may disconnect your line at this time.

All right. So let's go ahead and let's go ahead and bring it here. All right. So very quickly, very interested why they didn't answer any retail investor questions. I know retail, unless you guys never ask questions on the Reddit page, I think honestly, you guys always do. I haven't checked. Maybe someone can send me the Reddit questions, but Uh, that's something that they should continue to answer these questions. Um, so that's, uh, you know, what makes them special. I feel like that was really, you know, so that's something different. Usually they have a couple of questions from the retail community space, but, uh, that's something that they should keep continue, you know, to do. Overall, not too many institutional investors asking questions. A lot of the institutional investors brought their lower-grade assistance, maybe. That's what it seemed like to me. It wasn't your typical analyst for that specific healthcare director for that section of the investment bank of the institutions that they represent. So that was fairly interesting. But overall... You know, we'll talk about this in our next video regarding intrinsic value calculation. He said... He did just say that we're going to execute on the path to profitability. But, you know, they have said this in 2020. But now... uh i think uh didn't he say in the video i said this a lot i said profitability a lot we've been saying that a lot you know i'm happy that they got the message right show us you're profitable show us and then you then once you're you know oh oh wow you guys work then great we'll be able to expand And better yet, if you can show us you're profitable and then show us your software and actually monetize your software, I believe that they are and will be a SaaS company in the future. I don't know when. But if they do that, then the SAS index will commence. SAS index, we'll talk about it. Our members on our stock terminal, you guys know what that is. An easy four to six revenue multiple. I doubt we're going to see the 15 plus that we saw in the easy monetary policy, but it's very plain and simple. All I wanted to see in this earnings report is a trend downward in terms of losing less money. The net loss has decreased. Now, I want to go ahead and share a screen really quickly. and share something really important. And then we'll go ahead and leave it there. So as you can see here, if you look at the operating segment and look at the gross profits, you can see that their non-insurance side, its gross profit was at a loss of 21 million. And if you go ahead and look at the insurance side, it's actually positive. So overall, we are headed towards profitability and definitely is a great time to be alive, honestly, and be able to communicate with you guys. Because let's just be quite frankly honest, 10 years ago, 15 years ago, 10 years ago, 1995, 1996, 30 years ago, right? Do you think retail investors had a group? You think retail investors had the power to analyze these companies and have enough financial literacy to break this down, to have the significance of institutional hedge fund data to parcelate the data points and be able to break things down? Of course not. And now we have the power of the internet to be communicated to essentially be able to get retail investors to get a fair shake on Wall Street. Okay. So it's one of those very exciting times. And let me go ahead and skim through the last bits of the comments here. And if you guys are interested in our Mastering Stock Market course, there'll be a link down below. And as well as our seven-day free trial regarding our stock terminal, also linked down below. Let's go ahead. So we'll go ahead and we'll answer this question when we get into the specifics of the revenue and the net income. It's a little bit over an hour. I just wanted to kind of keep it near that mark so people can kind of rush through it and go through it. But again, it's very excited to host these things for you guys and to break this down. And I can't wait to see the progress. We're going to hold you to it, Andrew. We're going to hold you to it, Andrew. All right. So really excited. And I'll see you on the next one.