All right. Good afternoon, everyone. Pleased to have you all here and with us today. We have Clover Health CFO, Peter Kuipers, who's here. He's going to kick off with a presentation first, so I'll hand it to him.
Yep. Thank you, Jonathan. It's great to be here. Thank you for inviting us. Here's a regular forward-looking disclaimer. So I wanted to start with a financial update on the company year-to-date and for 2024. So we are a tech-driven and tech-led insurance plan that also now has a software offering for third-party insurance plans. This year, we are achieving meaningful profitability on an EBITDA basis. We improved 2024 full-year guidance three times this year, and we're guiding, and we've had positive cash flow from operations. Strong fundamentals, strong insurance results. We have, and we'll talk about it a little bit later in the presentation, leading medical cost ratios. We have continued top-line growth year-to-date. On a revenue PMPM basis, we've grown 9% year-over-year for the first nine months year-to-date. And again, we focus on technology, and our technology platform is called Clover Assistant.
We're also proud of achievements from a clinical and star rating perspective. We have received a four-star rating for our PPO plan for payment year 2026. And the overwhelming majority of our plan members, 95%, are in our PPO plan. We've also released results on HEDIS performance on core measures. That's a clinical set of measures, and we're proud to say that our technology focuses on clinical outcomes as yielded the highest score in the country. And then lastly, also, our home care services are led by physicians. So all that said, we are now focusing on meaningful membership growth, both during this, what's called AEP, annual enrollment period, which is going on right now to the end of the year, and we're also starting to look already at 2026. And we believe we can self-fund that membership growth in a profitable manner, and we do think we're strongly positioned.
Here you can see our flow over the years and improvements in revenue and in gross profit and also in EBITDA. We've recently increased the EBITDA guide for the year as well to $55 million-$65 million on an adjusted basis for fiscal 2024. Let's now talk about our differentiated approach. Our technology is focused on better and earlier chronic disease management. We are exclusively focused on Medicare Advantage, and we do believe that our technology earlier detects chronic diseases and also drives better outcomes for our members, while at the same time reducing total cost of care. Our care platform or technology enables the physicians, and it's powered by AI and large language models. In addition, we have a home care unit that provides services led by physicians at the home using the same software platform.
An important choice for members, especially as we are in AEP and looking at membership growth. Insurance members can choose their doctor or PCP independently. It's not restricted, and that can yield, we believe we can perform very well in a wide network of fee-for-service physicians. Here you see actually our technology platform, Clover Assistant. You see the layout. You see the user interface. It's elegant, easy to use. It's designed by physicians for physicians. There's full integration with most EHR systems and other healthcare systems, and it helps with clinical judgment. It superpowers the PCPs, and this technology is powered also from a moat perspective by a strong IP portfolio. Looking a little bit deeper, here is the layout of an actual screen. What the software platform actually does is it connects over 100 data sources real-time via the cloud.
And that includes most EHR systems, pharmacy data, claims data, and also most lab data. So what it actually does is it gives a summarized, curated, personalized view of the medical conditions and the medical history of an insurance member at the time of the visit with the PCP. So it empowers the physician to have full knowledge already. And then secondly, our software is powered to recommend clinical actions, a care management program. You see that on the left side. That is also AI and machine learning, large language models powered. And we believe this leads to earlier identification of chronic diseases, earlier and better care management, and ultimately also lower total cost of care. Again, on the left side, you can see Clover Assistant. Again, cloud-based, AI-powered. We can scale it. It's tech at scale, large data set. There's a closed feedback loop as well to reiterate constantly.
And we've driven results without risk delegation at scale now for a number of years. So you see the results in full as a result of our technology. And then again, Clover Home Care on the right, in-home for higher acuity patients using the same technology platform, physician-led. Here's the flywheel. So given all that, we're able to offer a strong benefit plan, a high-choice plan design, product strength managed by physicians, and a flywheel of more and more physicians using the software that we constantly improve and expand. And then, of course, the combination of physicians and the platform leads to better clinical outcomes and lower cost of care.
I wanted to spend a moment as well to really contrast the business model and the approach of Clover Health versus other insurance plans, MCOs or traditional MA plans on the right here, and some technology solutions are in the middle here. We are a full-at-risk insurance plan using technology first. Our software platform enables earlier diagnosis of chronic diseases at the point of care, at the time of care. Very important. If you contrast that with traditional MA plan approaches on the right, who mostly rely on delayed claims information, our software platform gives the opportunity to both the physician and the patient to have earlier and better care management. Of course, our plan is a full physician choice for the members, and then we have a physician-led home care practice as well.
And at the bottom of the page, you can see the industry-leading financial ratios, both MCR and the BER ratios, are industry-leading. Now, besides our own plan, we now have made this technology also available for third-party MA plans and third-party risk-bearing providers. So on the left side, you can see the benefits for these third parties. So we have conviction that we can use the same technology for these third parties, and then they can achieve, for their operations, we believe, 1,000 basis points or higher or better improvements on their gross profit margin. That is fairly substantial. Now, we believe we can achieve that over multiple years. That's not in one year, but over multiple years. We have high conviction there. Again, same platform, same clinician-driven, same clinical outcomes.
Helps improve health outcomes, earlier diagnoses, better care management, lower total cost of care, and importantly, also better quality improvements, which might help these third-party plans with their star ratings, of course. What does it mean for Clover? Technology is already developed over the years, tested, proven, and we offer it. Each agreement has essentially two elements. So the revenue streams are a SaaS revenue per member per month that is covered by the software within these third-party insurance plans and third-party at-risk providers. And then we also share in the gain share. We take a part of the improvements that they make on their gross profit, and that classifies as tech-enabled services revenue. So characteristics, of course, are relatively low customer acquisition cost and higher margin over time compared to the insurance business.
Now, looking ahead, we believe we have very strong business fundamentals, strong financial results, healthy balance sheet. We have improved the guidance for 2024 and raised it three times this year. We're focusing now on growth for 2025 and 2026. Again, we now have a four-star rating for payment year 2026. We've proven that we can be profitable at a three-and-a-half-star rating. Again, we'll develop and continue to develop and iterate our technology platform, and we'll continue to make it available for third parties.
Okay. Thanks. That was a nice, good overview of the company. I guess we'll just kick it off and start with Medicare Advantage. We're obviously in the Annual Enrollment Period now. So can you talk about how it's trending for you thus far and within New Jersey since that's your primary state? Anything to call out in terms of benefit design between yourself and others?
Yeah. Yeah. So we haven't quantified what we see in AEP quite yet. So AEP runs through December here this year. That said, though, there's a couple of data points that you can see in the market. You can see that a number of other plans have reduced benefits. Some plans have actually closed. Some plans have actually closed, including in New Jersey. Some plans also have stopped paying broker commissions starting last week, Monday. So we believe, given the technology and our performance, we believe we're well set up for growth in AEP this year. I would also point out that given all the headwinds and the dynamics in Medicare Advantage that you see more on the traditional MA plan side, that likely OEP in the coming year will be probably larger than it has been historically.
That's interesting.
Yeah, and from a benefit design perspective, I didn't answer that part of the question. We've slightly improved our benefits year over year in the plan for members, while others have reduced benefits.
Yep.
In general, the one that, yeah.
Yep. Of course.
Yep.
So you got the four-star Star Ratings for payment year 2026, which is a really good accomplishment given most Star Ratings ended up declining for a large number of plans out there. From your perspective, how are you thinking about where the priorities will be with this extra funding?
Yeah. So the way we think about growth over the medium to longer term, right? So we're well positioned now with leading medical cost ratios. In 2024, we've built a history over time. We believe we'll have a strong AEP. So we believe we'll gain members this year. Part of the technology and the approach that we have is that we also can manage the cohorts. So the new members this year will be able to get earlier care management. And in general, they should have better health outcomes going into year two, right? There'll be a year two cohort in calendar year 2026. They're looking at AEP October, December 2025 for date of service year 2026. We'll go into a payment year on a four-star basis, which means there is a 5% bonus payment on the top line in general.
That said, in plan design, plans generally look at also the benefit ratios and the benefits we give, right? So do not expect the full follow-through of the 5%, but generally, it should be a tailwind from a profitability perspective, while also enabling us to grow above market likely.
Okay.
Yeah.
So your presence is essentially focused in New Jersey. What, in your mind, allows you to operate well within New Jersey? And what makes it unique relative to other markets for you right now?
Yeah. Yeah. So the majority of the members are in New Jersey. That said, the market share, if you look at a total MA basis, we're probably around 10% of the market. If you exclude a group, we're probably at 20% of the market. Given all the dynamics, the plan closures by others, the pulling down of benefits, the stop-paying commissions for some plans, we believe we can grow in New Jersey. And then looking at other geographies like Georgia, South Carolina, and Texas, because our software is easy to install and easy to use, we also see growth opportunity there.
Okay. When you think about the potential for expansion into new markets, what are your high-level thoughts on how your approach might be now? And when you think about that J-curve to profitability in the geographic region, do you have a timeframe in mind and the needs to get there?
Yeah. So we have plenty of growth and significant growth potentially ahead of us in New Jersey and the other three states that I mentioned. I would say for the other states, we have an opportunity, of course, to offer the software solution and help third-party insurance plans, MA plans there, and at-risk-bearing providers. And we can grow in a capital-light, asset-light way there.
Okay. When you think about growth against maintaining the current levels of profitability, what are your thoughts around this? And should we think that market growth is the new normal for the company ex kind of the Stars benefit that is embedded in there?
Yeah. Yeah. So from a top-line perspective, we want to stop short of giving guidance for next year and the following year. That said, we're well positioned, probably better positioned than competition on top-line growth and on membership growth, or maybe in the reverse order, right? Profitability-wise, of course, growing has additional costs with it as far as customer acquisition costs, marketing costs, and also broker commissions to some extent for the members that join via that channel. We have increased our SG&A guide for the year, specifically for the fourth quarter this year for additional marketing costs, right? So you can see the investment there. Again, so growth, there's a certain investment, but.
Okay.
Yeah.
PPO products have been one of the areas of pressure for the industry at large this year, and where there has been a pullback in terms of product offerings across the market. When you think about what works for Clover versus peers, what's kind of the differentiator within that context?
Yeah. So from a PPO perspective, so we have designed our technology and our platform on the PPO chassis. So that's where we started. I think some of the other players really moved from HMO into PPO. So we haven't done that. So from the get-go, the focus essentially being able to work really well on the PPO chassis on a fee-for-service basis without risk delegation. So it has been our primary focus many years back when we decided to design the technology.
Okay.
Yeah. And we're able to work also with small practices, again, because the technology provides superior levels of interoperability, gives you all the healthcare data for a certain patient, and also really superpowers the clinical recommendations for care management. And then also, I think we've said publicly also that relatively within our lower MLR compared to other players, we likely have a greater portion of the total cost actually more focused on PCPs, right? There's more care or more time spent with patients upfront rather than in higher acuity situations, which are also higher costs, right? Those are some of the dynamics.
Yep.
Yeah.
So kind of along that line, when you think about the scalability of Clover Assistant, I've never really thought of it as a technical issue to scale up, but it's probably more convincing docs to adopt it. But where are we in terms of adoption? And as you think about those who want it versus not, what are those conversations like, and where is the pushback from some docs to adopt it?
Yeah. Yeah. So of course, the adoption is a combination of both the PCPs using the software and then also having members in the same areas, right? So that's the combination there. Physicians in general like the user interface, the data, the insights that it gives to a PCP for care management. Yeah.
Okay. I guess what's the pushback for those who do not want to adopt it, if there's any?
Yeah. They might have contracts with others, etc., but yeah.
Okay.
Yeah.
And you've talked about adding additional capabilities for Clover Assistant. Can you talk about what additional abilities you're adding?
Yeah. So we have a medium and longer-term technology product roadmap. So think about it as a technology company. So we have that rhythm where we constantly iterate on them and improve the performance on existing features. And we're adding additional features as we go, essentially every quarter, every year.
Okay.
And there are other areas. So you could expect in general to see more features added from both the clinical perspective, but also from a UI perspective, like being delightful to use for users as well, right? So think about those two areas, and you could expect over time to see more white papers as well on the effectiveness and the results of using Clover Assistant for certain chronic diseases versus not using Clover Assistant.
Okay. I guess along that line, would those additional capabilities, how do you think about that helping in that improvement of 1,000 basis points MLR? Could we see an increase in that 1,000, or is it more expediting it?
Yeah. So the 1,000 basis points, that's what we're over 1,000 basis points, by the way, right? That's what we have conviction for third parties. Of course, for our own plan, we've had much more improvement than 1,000 basis points. Yeah. But in theory, it would give us more conviction.
Okay.
Yeah.
I guess turning to Counterpart Health now. The company signed The Iowa Clinic as a customer for Counterpart Health. Can you talk about how the rollout has been thus far and the feedback?
Yeah. I mean, that was just getting started, right? The Iowa Clinic, we announced that, if you will, so the way to think about Counterpart Health is it's a software solution. It's relatively easy to train. It's web-based, so it's quick, if you will. That said, from a commercial pipeline perspective, you should think about it's fairly typical for healthcare. We're between kind of an initial meeting and signing off a contract. It could be around 12 months, right, if you will, and then you really define an implementation plan, and then an implementation plan, you typically roll that out by practice, by facility, or by county, if you will, so you can think about Iowa Clinic that way as well, so the rollout will be over time.
Then also, from a revenue perspective, once the software is in place and being used by physicians, once members come in for a visit with a PCP, then the PMPM SaaS revenue starts running, right, from a recurring basis perspective.
Okay.
Yeah. So think about it as layering, if you will, and then the gain share, right? The gain share of measuring the improvements in MCR year over year will be kind of think about it as like the fifth quarter after an implementation has started because you then have a measurement point, and we can look at the gain share then.
Actually, on that gain share point, is there, let's say, they hit 85% MLR, and it kind of gets hard to move much more beyond that. Would you still recognize any benefits out of that, or how would that work?
Yeah. I think most of the pipeline and customers that we look at are far away from the 85%.
Okay. Gotcha.
Yeah. And that's a CMS measure, by the way, right? So.
Yeah.
Yeah. Yeah.
Okay, so can you talk about how the sales process works for Counterpart Health and what they need to see before you actually close the deal?
Yeah. So I talked about it a little bit, right? So I think it's both a clinical solution, right? So we have proof points there in our own plan with white papers, etc. And then also, of course, the financial performance also, right? So those are generally kind of the two parts of what we walk potential customers through.
Okay.
Yeah.
How does the pipeline for potential new sales look at this juncture? Are people looking for proof points from Iowa Clinic, or how's that pipeline?
Yeah. It's a strong pipeline. So both from a kind of a payer perspective and a risk-bearing provider perspective at different sizes as well. So more to come on that. So we are intending to do press releases on some of the logos. We have to realize that in healthcare, not all plans or health plans or at-risk providers want to disclose kind of the logo. So it'll be measured as well, but there's more to come.
Okay.
Yeah.
As you go to market for future sales, what's the main selling point and the hesitancy from providers and plans? What's their hesitancy on taking on this offering?
I believe it's mostly time going through the process, if you will, the commercial pipeline.
I guess from a doctor perspective or anything, do they push back and say, "Hey, we need to see a little bit more"?
Yeah. Yeah. Of course, the approach is to get buy-in from the C-suite, right, including the CMO as well, and at times also CFO. And then from a clinical perspective, also buy-in on the rollout as well, right? So those are the three factors to consider.
As you go to market with this product, do you need to bulk up Salesforce moving forward, or how should we think about that?
Yeah. So we are hiring. Think about it's really a BD team. It's a BD partnership commercial team, if you will. We have hired in the last couple of weeks. So some of the additional commercial BD employees will start in the next couple of weeks. So we are investing in that area.
Okay. And when you think about landing with Iowa Clinic with Counterpart, how does this play into the insurance side, if at all?
That's the same software platform. So there might be clinical learnings that we can leverage also on the insurance plan side. But from a data and security perspective, it's multi-tenant. So the infrastructure is separated and secure, if you will. But there might be learnings both ways.
Okay.
Yeah.
And then does this create an opportunity to take your insurance plan into those markets, assuming there is success? Anything around that?
It might be, but we're starting first with the software offering.
Okay.
Yeah.
And then, if we think about the incremental cost to "land and expand" into different geographies with Counterpart, how does that kind of?
Yeah. That is relatively capital-light, right? So it's sales or the commercial BD team, if you will, and then some implementation cost. But essentially, no customization of the software.
Okay, so what if a client did want that customization for themselves? How much more cost-intensive would that be, etc.?
It would depend, right? Yeah.
Okay.
Yeah.
I guess we'll go back to the core Medicare Advantage side. I guess in your mind, what's been the problem within the industry in terms of we have seen these spikes that's been out there? How do you guys frame it versus kind of what you guys are seeing?
Yeah. I think I go back to the page here on the differentiated approach as far as the business model. So technology first, over 100 sources of medical data that helps the physician with clinical care management recommendations at the point of care, at the time of care, so not delayed. So generally, care is given a number of months earlier, if you will, and also because we have better insights. Would also say what we talked about earlier is that our technology and our plan design is based on PPO first, whereas others have started maybe in HMO and then moved over, maybe used the same approach for PPO by and large, right? So it's being closer to the patient, being closer to care management that we think makes a difference. And it shows in the results, right?
Yep.
Again, we don't have any risk delegation, so you can see it all straight up in the results.
Right. And then just from some of the utilization that others have seen, are you guys seeing that, say, two-midnight or some of the outpatient utilization, things like that?
Yeah. So Two-Midnight, we've always used already. So that's not a change for us necessarily. We've seen medical costs come in as expected, right, through the year. So we don't see the spikes that others see on inpatient.
Okay.
Yeah, and then again, we believe that is because using our software platform, clinicians diagnose earlier, care management starts earlier, diseases are treated earlier, diseases might not progress in more acuity, and therefore there might be less inpatient activities also.
Gotcha.
Right?
Okay. Well, that's all the questions I had. So thank you for joining us, and everyone, enjoy the rest of the conference.
Thank you. Thanks for having us.