Clover Health Investments, Corp.

Hello and welcome to Clother Health's third quarter 2025 earnings call. We ask that you please hold all questions until the completion of the formal remarks, at which time you'll be given instructions for the question and answer session. Also, as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ryan, you may begin.

Good afternoon, everyone. Joining me on our call today to discuss the company's third quarter 2025 results are Andrew Toy, Clover Health's Chief Executive Officer, and Peter Kuypers, the company's Chief Financial Officer. You can find today's press release and the accompanying supplemental slides, as well as the company's most recent investor deck in the investor events and presentation 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 Global 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 are detailed in our SEC filings, including in the risk factors section of our most recent annual report on Form 10-K and other SEC filings. Information about non-GAAP financial measures referenced, including reconciliation of those measures to GAAP measures, can be found in the earnings materials available on our website. With that, I'll now turn the call over to Andrew.

Thank you, Ryan, and welcome everyone to Clover's third quarter earnings call. There are three main areas I want to focus on today. Firstly, that our growth engine is running well and we remain focused on growing sustainably and profitably. Secondly, taking everyone through the drivers of our lowered guidance for 2025 adjusted EBITDA profitability and what we're doing to address it. In short, we do see broad systemic utilization pressure, but this is also compounded by our growth. We feel we can address this, but it did hit us significantly in 2025 because of that growth. And thirdly, talking about our recently announced star ratings and how we intend to ensure we can grow profitably, whether at three and a half or four stars. Overall, I want to say this. We missed our targets on both overall adjusted EBITDA and stars. While we will remain profitable and growing, these misses aren't at all acceptable to us. They do not capture our aspiration or bar for the company. We can and will make quick adjustments. The good news is that Clover Assistant remains incredibly strong as our core driver. Our CA managed returning cohorts improved year over year. CA also enabled Clover to be the top PPO in the country for the second year running on core HEDIS clinical quality scores. The bad news is that while we did plan for growth and utilization headwinds, we clearly didn't factor those in strongly enough or manage those tightly enough in the non-CA population, which definitionally includes the new members. So those areas are where we're going to intensely refocus going into 2026, which I think is going to be a big year for Clover. Okay, going into more detail. For the third quarter, we've remained adjusted EBITDA profitable on a wide network while growing membership by 35% and revenue by nearly 50% year over year. That does meet our goal of profitable growth. Other plans which grew this much on the PPO have been pushed into retreat. That said, I want to note that we did originally enter this year intending to have significantly higher overall adjusted EBITDA even with the growth. Ultimately, this adjusted EBITDA pressure came firstly from the higher than expected proportion of new members and the fact that we didn't bring them under management as quickly as we originally planned. And secondly, we saw increased utilization across both medical expenses and supplemental benefits similar to others in the industry. I'm going to focus on the first and Peter will discuss more on the second. On an adjusted EBITDA basis, our returning members continue to have a contribution profit, but this did not fully offset the dilution from our larger than expected new member growth. While we had anticipated this pressure from returning to growth, we captured additional market share as competitors retreated, with the market disruption effectively accelerating our growth. This has led to reduced adjusted EBITDA profitability as the cost profile of first-year members, which we see as a combination of marketing, commissions, and first-year medics, puts pressure on our results. For the full year 2025, we now expect to add roughly 44,000 gross new members within an expected year-end 2025 population of approximately 113,000 net members. This has had a meaningful impact on our 2025 adjusted EBITDA profitability as we are scaling from a relatively smaller base and new members are generally loss-making for us in the first year. That said, our cohort experience and strong historical retention demonstrates that this large new population will bring a larger contribution profit positive base of returning members in 2026 and beyond. We also expect 2025 to be the peak year for this kind of effect. In our modeling, with our latest cohort data, we expect that we will be able to continue growth and have meaningful adjusted EBITDA profitability starting in 2026. That was our goal for 2025, but we were extrapolating new member performance as this was our first year of significant growth. Now that we have that under our belt, we feel more confident in our views on 2026 and beyond. Ultimately, we believe the fundamentals of our business remain strong and the margin pressure we're seeing this year is driven by cohort dynamics. Each new member represents strong long-term value, but requires time to come under full Clover-assisted management. While that dynamic compresses margins in the near term, it's exactly what we believe builds the foundation for margin expansion and accelerated growth in the years ahead, where we anticipate rapid improvement in outcomes and cost performance in our cohorts. Said differently, our returning Clover Assistant managed members remain strongly profitable and are effectively funding this reinvestment in acquiring and developing new member cohorts. Our confidence in Clover's trajectory is rooted in a simple truth. We believe that our model delivers better Medicare Advantage results for more seniors. Clover Assistant is designed to identify and manage disease earlier, providing a multi-year improvement to total cost of care. When paired with our care delivery assets and the close partnership of our Clover Assistant using network providers, we see consistent medical cost management year over year. We're continually focused on increasing physician adoption and remain on pace with increasing our Clover Assistant coverage across the book, with more than half of our new members already having received a Clover Assistant visit this year, which is consistent with our internal targets. The combination of strong retention, more members, more CA engaged physicians, earlier disease detection leads to strong returning member cohort performance and reinforces the strength of our model and our ability to help manage conditions earlier and better for our members. Next, I'd like to discuss the current annual enrollment period. While it's too early to provide an AEP update in detail, I would preliminarily note that we remain on track to once again deliver strong above-market membership growth and retention within our priority markets. These markets are the ones where we have strong CA network coverage, an existing membership base, and our home care capability. Our plan offerings reflect exactly what Clover stands for, low out-of-pocket costs, physician choice, and real value for seniors. While most of the industry is pulling back and narrowing networks, we've doubled down on maintaining a comprehensive PPO portfolio that prioritizes open access with stable, predictable benefits. We believe seniors deserve choice, access, and simplicity, and our 2026 plans deliver all three. Turning now to star ratings. We received a three and a half star rating for the 2026 ratings year. This does not represent our aspiration. We want a four star plan. That said, let me start by explaining how our model is built to perform well, even in three and a half star payment years. Firstly, we do not view the star rating as an inhibitor for growth. Medicare eligibles are attracted to low out-of-pocket costs with wide physician choice. And based on our experience, we anticipate strong attraction to our plans on that basis, independent of star rating. We also don't perceive the star rating as a true measure of overall health care quality. Our focus remains on delivering meaningful improvements in care and outcomes for our members. And one way this commitment shows up is in our HEDIS results. Clover Assistant once again powered Clover to the top of the industry for clinical quality with a HEDIS score of 4.72 for our PPO plans, making us the highest performing PPO in the country on HEDIS measures. This reflects the consistent, data-driven care delivered through our technology and physician partnerships, which continue to improve members' health in measurable ways. So while our focus remains on driving better patient outcomes, we believe that the current star ratings framework does not fully reflect the clinical quality of care our members receive. We continue to actively engage with CMS to advance how quality is measured and remain committed to working constructively toward a methodology that better captures true performance. Ultimately, though, we want a four-star plan. We are walking through all areas that we underperformed on and making sure that we have plans in place, plans that also incorporate the significant growth that we have had and will continue to have. For example, while we were the top rated PPO plan in the country on HEDIS quality, we were greatly let down on our star scores because of very low one and two star scores on our pharmacy measures. We are very focused here and are intent on improving our performance in this area going forward. Now I'll provide a counterpart health update. The new organization continues to make strong progress expanding both the reach and capabilities of our technology. During Q3, we've rolled out major new capabilities, such as integrated scribing and generative AI tools that help physicians better prepare for visits, reduce administrative burden, and stay focused on patient care. Also powered by CA, and as I mentioned earlier, we've achieved industry-leading clinical quality HEDIS results for the second year in a row, and we've made this capability available as part of Counterpart's new enterprise offering. And lastly, we're seeing good demand, and so we've expanded our go-to-market team and leadership to support new partnership opportunities with provider groups, health systems, and both regional and national payers. Together, these advancements further establish Counterpart Health as a leading technology partner for value-based care. The key for Counterpart is this. Since its launch last year, we have seen tremendous resonance with health plans because our technology provides a capability to them that they've never had before. This capability is to engage smaller independent doctors who typically manage around 20 to 30% of a given plan book. These doctors are often great physicians, but do not have the infrastructure to be successful in value-based care, and almost no plan has a strategy to successfully engage them. Counterpart deployments have now shown in multiple states and for multiple customers that we can effectively serve this market, and we've heard that resonance with our target customers. We believe this remains a huge blue ocean opportunity for us and provides us the opportunity to bring our technology far beyond the reach of our owned and operated plants. In overall summary, our long-term trajectory is unchanged. Our technology is scaling as we aim to empower more and more physicians with Clover Assistant, and we're focused on growing our profitable returning member cohorts. We anticipate having a large contribution profit positive base of returning members in 2026 and beyond, which will fund future new member growth. This year is just the start of that arc, and while we have several areas we need to improve, I feel strongly we are on the right path. I'll now turn it over to Peter, who will walk through our financial performance in more detail and how we're positioning the business for adjusted EBITDA profitable growth in 2026 and beyond.