Good morning, everyone. Welcome to the Tuesday session of the Leerink Global Healthcare conference. I'm Whit Mayo. I lead the firm's efforts covering healthcare providers and managed care. It's my pleasure to have the team from Clover here. Peter, I think, why don't we just go ahead and get started? You got some slides you want to go over, and then we can get into some Q&A.
Thank you, Whit. Great to be here. Yeah, so why don't we get started with a short presentation, and then I think we'll do some Q&A as well. Here's a regular disclaimer on forward-looking statements. Clover, our vision for Clover is through a technology-driven approach, clinical AI and machine learning powered to drive earlier diagnosis and treatment, better and earlier chronic disease management, delivering higher quality of clinical care at a lower total cost of care. That's our vision, and we'll talk about the results so far in a little bit as well. Our technology platform, powered by AI, is focused on enabling the physician, the clinician, to drive better outcomes. This is across the continuum of care. We focus on PCPs, enabling them to deliver better care. We also have a home care solution that is led by MDs.
In general, we believe that we can deliver better care for chronic diseases. This is also demonstrated not only by our financial results, but also by various white papers, including white papers on CKD, diabetes, and medication adherence. These are publicly available, and we expect to deliver and publish more white papers in the future. Clinical outcomes in general are also better compared to other solutions. This is also demonstrated. We got awarded the nation-leading quality score, also called HEDIS. Now, how does our technology work? On this page, page five, you can see our technology called Clover Assistant. This is the actual screenshot that a physician, when using our technology, sees and works with.
First, on the top right, Clover Assistant connects real-time via the cloud over 100 medical data sources, including virtually all EHRs, virtually all pharma data, all claims, and close to all lab results. Not only does Clover Assistant connect all these data sources, it also curates and synthesizes the data for the specific patient that our PCP is seeing and also synthesizes the main medical records to look at. That saves time, and from a completeness perspective, it gives a more holistic picture of the patient. During the PCP visit, additional notes are added, and our machine learning AI-based model then suggests a care management program up to the PCP to select that. We have years of experience here with a large data group at scale at full risk.
It's a very elegant solution, and of course, we continue to invest and iterate and evolve the platform. Again, over 100 cloud-based real-time data sources, and our ML, machine learning, and AI-powered models, we have more than 100 proprietary models protected with a moat via IP and patents. Care management focuses on earlier diagnoses of chronic diseases, very specific patient insights, closing care gaps as well, focusing on medication adherence, very critical, and also on transitional care. In addition to Clover Assistant technology used by PCPs, it's also used by our MD-led clinical teams in home care. We believe we have a differentiated solution there using the same software so we can close care gaps at the home, prevent readmissions, and when appropriate, also have hospital admissions. Clover Home Care is focused on the highest acuity patients.
Page eight in the deck that we posted on our website focuses really on the differentiation of our business model. It's important to note what the differences are. On the left side, you see Clover. On the right side, you see more traditional MCOs. We focus solely on Medicare Advantage. We're focusing on clinical AI-powered technology. We focus on earlier diagnoses of chronic diseases, therefore also earlier, and we believe, better treatments, better health outcomes, delivered at lower cost. The vast, vast majority of our members are in our PPO plan, so that is free choice for our members to choose their provider. We are proactive as compared to some of the other MCOs that are more reactive, waiting on claims management, and maybe have more reactive population health solutions. Important to note also is we have no risk delegation.
The results that you see in the financials are pure from that perspective. Again, our home care also uses the same technology. That in totality leads us to industry-leading cost ratios, both measured on an MCR basis or a BER basis. Our plan, our Medicare Advantage plan, operates in four states currently: New Jersey, Georgia, South Carolina, and Texas. We want to bring our vision and mission and strategy is to bring this leading technology also to a wider population outside these four states. Since the middle of last year, we've started offering this technology as software as a service to other Medicare Advantage plans in the other 46 states and also to risk-bearing or at-risk providers in the other 46 states. It's a proven technology.
We can help these plans and providers also drive better health outcomes via earlier diagnoses and better care management, delivering better clinical care and quality and also lower cost. We believe these solutions can deliver over 1,000 basis points improvement in the medical cost ratios for these Medicare Advantage plans or at-risk providers. We have a strong pipeline of deals for what we call Counterpart. This is our software solution, and we announced a number of deals last year, including Duke and Iowa Clinic. Now, what is our opportunity? We really have three chapters. 2024 was a year of reaching meaningful profitability. We delivered $70 million of adjusted EBITDA for 2024. That's a $112 million improvement year-over-year. Revenue grew close to double-digit at 9% year-over-year, and we delivered $82 million of cash from operations while delivering industry-leading loss ratios.
We delivered great momentum in AEP, annual enrollment period, delivering 27% growth in new members starting at 1/1 or January 1 this year. Going to 2025, we see as a year where we continue the momentum and we balance the growth with profitability. We're estimating our total average membership for the year to increase by 30%. We estimate our revenue at the midpoint to grow by 37%, and we estimate adjusted EBITDA to be between $45 million-$70 million for the year, balancing investments in growth for new members, the network, benefits, and also R&D and technology. Looking at 2026, we believe that the disruption that other players in the market are expecting will continue for multiple years. We believe we're very strong positioned for continued strong AEP and OEP growth for the next couple of years.
2026 also benefits from a four-star payment year from a financial perspective. 2026, we believe, will also benefit from the new cohort in 2025 becoming a year two cohort when they, by and large, will have benefited from visits powered by the Clover Assistant technology, driving better health outcomes. We announced in the last earnings call our cost efficiency program. For 2026, we expect a more full-year impact of that cost efficiency program. From 2023 going to 2024, we reduced our SD&A as a percentage of revenue by over 200 basis points. The midpoint of guidance for 2025 also has a 200 basis points improvement or reduction in SD&A as a percentage of revenue. Again, we believe we're positioned for strong growth, not only this year, but also in the coming years. Our guide for the year for average number of members covered by Clover is 105,000.
We started the year at 100,000 members. We expect the year roughly to end at 110,000, yielding an average of 105,000 members. We also now, on page 12, have published, starting with the earnings call for the year-end results, the MCR differential by cohort, proving the impact of the technology. Compared to new members, the cohort of members in year two have a lower or better medical cost ratio by around 700 basis points. That improvement increases to 1,500 basis points in year three. This is via better care management, earlier diagnoses. In general, we believe if a disease is diagnosed and treated earlier, it generally is also at lower cost and with better health outcomes. We believe our flywheel is working. Again, we grow membership.
We drive additional usage, incremental usage of Clover Assistant, better care, improved health outcomes, better quality of life while delivering this better care at higher quality at a lower total cost of care. We balance the reinvestments, both in member benefits in the network, in new members, and also in technology. Looking ahead, we believe we have strong growth momentum, both on members and revenue. We're balancing profitability by investing in members, the network technology, and balancing that with profitability. We continue to deliver quality care at the highest quality scores, and we will make this technology also available in the 46 states that we're not operating as a plan.
Perfect. Thank you, Peter. Let's spend a second on the, I think it was about a year ago that you guys announced that you were launching your sort of SaaS platform, licensing some of the Clover Assistant technology. Maybe give a, you mentioned Duke, Iowa Clinic. Those have been two high-profile providers. I'm curious kind of the scope of the relationship you have there. Maybe just any update in general about the other traction that you're getting in the marketplace or just any changes in terms of that strategy overall.
Yeah. We announced the Counterpart SaaS technology offering in May last year, right? We have announced three logos since then. The way to think about SaaS offerings is that, of course, you have an initial agreement, then you have a rollout or implementation plan, and then generally by physician practice, members start being covered by the software, right? That will ramp over time, we believe. We do see strong demand, especially given the industry backdrop. A lot of the larger MCOs and also regional players have headwinds, as we have all seen. Pipeline is strong. More news to come. In the pipeline, we both have regional players, but also national players.
When you say national players, I'm sure we're talking about other health insurers, we're talking about large risk-bearing providers.
Both.
Both.
Both. Yes. Yes.
Okay. All right. These contracts, how are they typically structured in terms of, is it multi-year? How is that working?
Yeah. The over 1,000 MCR improvements that we just looked at in the deck, that is an improvement we typically see by kind of year two, year three for these other plans and risk-bearing providers. These agreements are multi-year in general. Yeah. I think important maybe to point out as well is that while we are growing 30% in membership in 2025 and 37% on revenue, there is a lot of growth to be had in the four states that we're in. Even after a very strong AEP growth in New Jersey, we went from around 10% market share to about 12-13%. There is a lot of growth to be had in New Jersey and the other three states that we're in. I think that's an important perspective too.
I've always wanted, like on that point, I think of Clover, the core New Jersey, right? Like that's been the.
That's the majority.
That's the majority of it. Then you've got Georgia, South Carolina, some of the others. How did the company land on those being the states that were the most attractive to them? What were the underlying characteristics of South Carolina and Georgia that drove that?
Yeah. The plan originated in New Jersey. Our model is really strong in an open network, so PPO. That is, of course, because our model provides clinical care at the point of care, at the time of care, right? That is difficult to do for other health insurers. We're perfectly built for that purpose. The wide network, PPO could be widespread as well.
Yeah. What about those states that made it? Is there something about those states where you say the underlying patient population is very similar to New Jersey or something that plays to our strengths? I mean, is that what you're basically saying?
Yeah. Essentially. Yeah.
Okay. Okay. All right. Strong growth this year. You've gotten a very strong growth. Any update on open enrollment now that we're sitting here in March and disruption that we're seeing with some of the competitors within the marketplace switching? Anything that you care to share?
Yeah. We're tracking through guidance, right? We're tracking to the 105,000 members on average for the year.
Looking at the benefits this year, again, a lot of your competitors had to make a lot larger adjustments. When you look at the changes that you made, where were the largest changes in terms of how you adjusted benefits this year?
Yeah. When we talk about AEP last year, so October through December last year, we kept the benefits for the Clover plans relatively stable. We were able to do that given our financial performance also. Some of the other plans in the market we've seen actually reduced benefits. Some plans also closed some regional plans. Some of the other plans stopped or reduced marketing activities as well, right, given the economic headwinds that they're experiencing, mostly on the PPO side. We haven't talked about the design for the plan for the bids coming up in May for AEP, but in general, we believe that we will have a strong offering.
How are you feeling about the IRA and how you've adjusted plan liability?
Yeah. We believe we submitted our bid appropriately. We feel comfortable with the impact embedded in the guidance. Yeah.
I was just thinking about one of the slides that you put up showing the, I was writing it down, the cohorts of the 700-1,500 basis point reduction in MLR year-over-year. I guess it was 700, maybe 750, something like that, year one, then year two. What's the definition of that? Is that last year? Is that showing like this is the average over a couple of years? How do I think about what that represents?
It's the latter. It's the average over a couple of years.
If I looked at individual years, has that reduction in MLR been improving or is it fairly steady?
It's fairly steady. Yes.
Yeah. And then the 1,000 basis point reduction, you guys have said this for years. I mean, I think since basically the dSPAC, it was like physicians that use Clover Assistant, we see 1,000 basis point MLR. Just remind me the definition of exactly what that 1,000 basis points represents.
That's the 1,000 basis points differential between a physician using the Clover Assistant software for a Clover member versus a physician not using the Clover Assistant software also for a Clover member. We can compare the two groups.
Are those physicians that are using, is it defined as in any that's just last year or that they're using it over the consecutive?
Over and over again.
Yeah. That's okay. I was just reminding myself exactly what that. Can we spend a minute on the home care solutions, the capabilities you guys have invested in? Yeah, maybe just sort of unpack a little bit what you're doing and how that's evolved over time.
Yeah. Home care, we're differentiated in a number of ways. First, we use, of course, the same Clover Assistant software. Our MD-led teams that provide home care at the home for our members have the full records as well, both the history and also the care management plan. It can help deliver that highest quality care and also update it, if you will. The other difference, I think, with other plans is that our teams are actually led by MDs and DOs versus maybe nursing assistants, right? We've seen that impact evolve over time, and we continue to invest in home care.
Okay. Cost trend has been an issue broadly for the industry. This just persistent high utilization, you guys have seemed to manage through it fairly well. How are you feeling about how you priced this year? What are sort of the underlying expectations that you've incorporated within your guidance for overall utilization days per thousand? However you want to talk about it.
Yeah. I think a couple of things to note there. We feel comfortable with the cost trend. We've been able to manage that via technology, via cohorts, via earlier diagnosis, earlier treatment, which leads to not only better health outcomes, but also to lower total cost of care. That's important to note. Maybe another lens of looking at this is if you look at our total medical expenses, which in totality or PMPM are lower than other plans for maybe a similar population, the percentage of cost for PCP visits probably is higher in that lower total, right? We pull care forward. It's earlier care, but also in lower cost settings, right? When you talk about inpatient per thousand, right? In general, we could be lower there as well versus competitors. We generally would see less of pressure there.
You're saying your medical expense per member per month is lower. The dollar amount that you may be spending on primary care probably is.
Higher within that. Exactly. That's the way to think about it.
Yeah. Okay. Interesting. Stars. Okay. So good year on Stars. We've got quality bonus payment coming into the picture for 2026. Payment year, 2026. Performance year, whatever we're calling it. How do we think about the incremental flow through? We've gone back and forth on this, and there's different views on how this works, but how should we think about what the tailwind is in 2026?
Yeah. A couple of different ways to look at it without giving very specific guidance for 2026. Going from a three and a half star to a four star payment year yields a roughly 5% bonus payment. Now, you have to also look at how you're going to design benefits and invest in the network. A portion of that we believe will fall through to profitability, either EBITDA or adjusted net income. More to come on that. The bid's coming in May here, but it definitely is a substantial or significant tailwind financially going from 2025 to 2026.
Okay. Looking back at this past year, one of the things I'm still struggling to reconcile a bit is just when I look at your growth in your PMPMs, it's been high single digit to low double digit any given year. I think part of that is a function of you didn't have the level of membership growth that maybe you would have had this coming year. You're seeing the benefit of a lot of what you normally get on the top line. You're getting RAF. Maybe help visualize how we're getting to that level of PMPM growth.
Yeah. If you look at PMPM maybe on the gross profit level in the P&L for 2024, our membership growth was limited to a couple of percent. Inherently, we had a really good retention rate, by the way, also in AEP at 95%, which we believe is probably industry leading. Within 2024, we had the benefit of cohort management, right? Members that joined two years ago became a cohort year three member, right? They already are largely covered by Clover Assistant technology. They have a care management program, etc. You will see those benefits come through, if you will. Now, going from 2024 to 2025, we have a new membership cohort, right? The PCPs that use our software generally will diagnose earlier, start care earlier as well. That also means that cost is also coming earlier, right?
In totality, over multiple years, total cost of care is lower. That means from a new cohort perspective, year one members will be a financial headwind, actually, offset partially by returning cohort members. That's the way to think about that. We'll ladder that and offset that as we grow over the next couple of years.
Yeah. On the operating efficiency, the G&A initiative that you talked about, maybe unpack a little bit what you're doing there, where you're taking cost out, like how we think about the go forward operating leverage over the next two, three years or so.
Yeah. Yeah. So 200 basis points improvement or reduction in SD&A as percentage of revenue from 2023 to 2024. Again, another 200 basis point reduction included in the guide at the midpoint for the year. Yeah. We expect that to continue, not necessarily guiding to a specific number of basis points going into 2026 and beyond, but there should be more leverage to be had. We are now becoming off scale where we have unit economics, the way we partner with vendors, if you will. We're moving really a lot of the vendors more to partners now. Of course, we are a very attractive partner strategically because we are poised for growth over multiple years as opposed to some other players, right? That's the way to look at it. Yeah. There's efficiencies across the board, right? From our technology perspective, we focus on the clinical side.
As you think about all the other aspects of plan operations, if you will, where we see efficiencies.
Yeah. When I think about it on a dollar base, I'm trying to open my model in my head right now, Peter. I feel like the dollars, though, have declined in the last year versus the prior year.
24 was down, I think, a couple of percent in absolute dollars. Yes.
Right. Yeah. You opened your model before I did. And then on a dollar basis, should we expect that to continue to decline right now? Should it flatten out and begin to grow on a dollar basis, but on a percentage basis, you're going to gain the operating leverage?
Yeah.
Yeah. Okay. That's how we're.
Yeah. We're looking at leverage on the percentage basis. Yeah. The SD&A is up year for year given the membership growth, right?
Okay. Right. Maybe we're running out of time here, but one last one, just broader on some of the industry changes and developments. We've got the caps reweighting. We've got the reward factor going away, the health equity index. How do you think about what the impact is on Clover as we transition through some of those industry changes?
Yeah. We believe we're generally well positioned to absorb and anticipate industry changes, as you've seen also with the IRA and FEET 28 also. Yeah.
Okay. Great. We're just out of time here. Peter, that's a great overview. Thank you, man. Good to see you.
Thank you. Good to see you.