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CLOVER HEALTH INVESTMENTS, CORP. /DE (CLOV)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong top-line growth but material margin compression: Total revenues rose 50.1% YoY to $496.7M, while GAAP net loss widened to $24.4M; Adjusted EBITDA fell to $2.1M as elevated utilization and a higher mix of first-year members pressured margins .
  • Guidance reset: Insurance revenue raised to $1.85–$1.88B and average MA membership raised to 106–108k, but Adjusted EBITDA and Adjusted Net Income were cut to $15–$30M; Insurance BER raised to 90–91% reflecting utilization and new-member mix headwinds .
  • Management’s “why”: Q3 pressures stemmed from unfavorable claims development (1H 2025 dates of service), higher inpatient/outpatient usage (oncology, cardiac, surgical), Part D headwinds, and abnormal dental/DME activity; returning cohorts remain profit-accretive, with new members expected to improve as they mature .
  • 2026 setup: Company targets full-year positive GAAP net income in 2026 on larger profitable returning cohorts, four-star payment year tailwinds (for 2026), favorable CMS Part C rates, higher Part D direct subsidy, and SG&A leverage; CMS later awarded 3.5 Stars for PPO and 4.0 Stars for HMO for “2026 Star ratings” impacting payment year 2027 .
  • Potential stock catalysts: The magnitude and duration of utilization normalization, AEP/retention trajectory into early 2026, and execution on Counterpart/AI initiatives (e.g., integrated ambient scribing) may drive sentiment and estimate revisions .

What Went Well and What Went Wrong

  • What Went Well

    • Above-market growth with technology-led care model: MA membership +35% YoY to 109,226 and total revenues +50.1% YoY to $496.7M; management maintained positive YTD Adjusted EBITDA ($45.0M) and Adjusted Net Income ($43.7M) despite headwinds .
    • Cohort economics and retention: Returning members remained contribution-profitable; ~700 bps MCR improvement from year 1 to year 2 and ~1,400 bps by year 3; retention “above 90%” in 2025 supports a larger profit-accretive base in 2026 .
    • Clinical quality leadership and platform reach: PPO HEDIS score of 4.72 (industry-leading) and rollout of Counterpart Assistant’s integrated ambient scribing/AI features to reduce physician burden and enhance outcomes .

  • What Went Wrong

    • Margin compression from utilization and mix: Insurance BER worsened to 93.5% in Q3 (vs 82.8% a year ago) and normalized BER rose to 92.4%; Adjusted EBITDA fell to $2.1M as elevated inpatient/outpatient usage and heavier first-year member mix hit results .
    • Part D and supplemental pressures: Higher-than-expected branded/non-formulary pharmacy spend and abnormal dental/DME activity weighed on results; management expects mitigation via 2026 higher Part D subsidy and internal initiatives (med rec, generic substitution) .
    • Guidance cuts on profitability/margins: Adjusted EBITDA and Adjusted Net Income reduced to $15–$30M, Insurance BER raised to 90–91% despite operating leverage improvements (Adjusted SG&A down to 14.3% of revenue in Q3) .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($M)$462.3 $477.6 $496.7
Basic & Diluted Loss/Share (Cont. Ops)— $(0.02) $(0.05)
Adjusted EBITDA ($M)$25.8 $17.1 $2.1
Adjusted Net Income ($M)$25.3 $16.7 $1.7
Insurance BER (Non-GAAP)86.1% 88.4% 93.5%
Adjusted SG&A as % of Total Revenues18.0% 17.3% 14.3%
  • Estimates: S&P Global quarterly consensus (revenue, EPS, EBITDA) was unavailable at the time of analysis; thus vs-estimate comparisons cannot be shown. Values retrieved from S&P Global.

Segment Breakdown – Insurance

MetricQ1 2025Q2 2025Q3 2025
Premiums Earned, net ($000s)$456,906 $469,826 $479,128
Net Medical Claims Incurred ($000s)$367,887 $394,212 $428,855
Segment Net (Loss) Income ($000s)$(19,390) $(32,388) $(43,448)

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Avg. MA Membership101,959 105,494 108,231
End-Period Insurance Members103,418 (3/31) 106,323 (6/30) 109,226 (9/30)
Total Cash, Cash Equivalents, Investments ($M)$390.8 $389.3 $395.9
Adjusted SG&A ($M)$83.1 $82.5 $71.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Insurance RevenueFY 2025$1.800B–$1.875B $1.850B–$1.880B Raised
Adjusted SG&AFY 2025$335M–$345M $325M–$335M Improved (lower)
Adjusted SG&A as % of Total RevenuesFY 202518%–19% 17%–18% Improved (lower)
Adjusted EBITDAFY 2025$50M–$70M $15M–$30M Lowered
Adjusted Net IncomeFY 2025$50M–$70M $15M–$30M Lowered
Avg. MA MembershipFY 2025104k–108k 106k–108k Raised
Insurance BERFY 202588.5%–89.5% 90%–91% Raised (worse)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 and Q1)Current Period (Q3 2025)Trend
Utilization trendsQ2 saw elevated supplemental benefits and Part D utilization; monitoring IRA impacts; overall underlying trends “generally satisfied” . Q1 medical costs in line .Unfavorable claims development (1H 2025 DOS) hit Q3; elevated inpatient/outpatient (oncology, cardiac, surgical) drove higher costs; expect Q4 seasonality .Worsened in Q3; normalized view to be watched into Q4.
Part D/IRA dynamicsQ2 flagged IRA as “known unknown” in first year; slight BER guide increase; expect 2026 relief from higher Part D subsidy .Part D pressures above expectations; initiatives: med reconciliation, generic substitution; 2026 higher subsidy supportive .Near-term caution; 2026 outlook improving.
AI/technology (Counterpart/CA)Q2 emphasized CA’s impact, external demand; COPD white paper; positioning for broader deployments . Q1 CHF white paper .Rolled out integrated ambient scribing and generative AI in Q3; continued high HEDIS (4.72 PPO) .Accelerating adoption/features.
Stars/qualityQ2: 2026 as four-star payment year benefiting results as 97% in PPO .Q3 mgmt references 2026 four-star payment year tailwind; later (Oct 9) CMS 2026 Star ratings: PPO 3.5, HMO 4.0 affect PY 2027 .2026 tailwind; 2027 PPO stars mixed.
Growth/retentionQ2 growth above industry; profitability sustained; building for 2026 .Retention “above 90%” and ~44k gross new members in 2025; larger profitable returning cohorts expected in 2026 .Strong growth with mix headwind in 2025; constructive for 2026.
Regulatory/advocacy—CEO testified to Congress on AI in healthcare; supportive of clinical outcome measures .Increased engagement.

Management Commentary

  • “We missed our targets on both overall adjusted EBITDA and stars…The good news is that Clover Assistant remains incredibly strong as our core driver.” – Andrew Toy, CEO .
  • “Returning member cohorts…generated approximately $217 of contribution profit PMPM vs a negative $110 PMPM for new member cohorts.” – Peter Kuipers, CFO .
  • “Medical costs in the third quarter were impacted from unfavorable claims development…higher medical cost trends across inpatient and outpatient services…outpatient oncology, and inpatient cardiac and surgical procedures.” – Peter Kuipers, CFO .
  • “We expect to achieve full-year positive GAAP net income in 2026.” – Peter Kuipers, CFO .
  • “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.” – Andrew Toy, CEO .

Q&A Highlights

  • BER/4Q cadence: UBS pressed on whether BER steps down in Q4. CFO pointed to intra-year prior period development affecting Q3 and advised averaging the first three quarters as a baseline for Q4 .
  • 2026 pricing and growth mix: On risk of mispricing given 2025 pressures, CFO said ~4% underlying incurred cost trend ex-pharmacy is baked into bids, with additional tailwinds (four-star payment year for 2026, Part C rate notice, higher Part D subsidy) and “nuclear precise” growth focus in priority markets .
  • Margin drivers: CFO reiterated elevated inpatient/outpatient utilization, Part D and supplemental (dental/DME) pressures, with remediation actions underway and expectation that abnormal activity will not persist into 2026 .

Estimates Context

  • S&P Global quarterly consensus estimates for revenue, EPS, and EBITDA were unavailable at the time of analysis; therefore, we cannot present vs-consensus comparisons or a beat/miss assessment. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Growth vs. margin trade-off in 2025: Revenues and membership materially outperformed, but mix (more first-year members) and elevated utilization drove BER to 93.5% and forced profitability guidance cuts .
  • Cohort math supports 2026: Returning cohorts remain profitable and are expected to expand materially in 2026, underpinning management’s goal of full-year positive GAAP net income next year .
  • Near-term watch items: Hospital utilization trends, Part D spend trajectory, and remediation of abnormal dental/DME activity into Q4 and early 2026 .
  • Operating leverage intact: Adjusted SG&A improved to 14.3% of revenue in Q3; full-year Adjusted SG&A guidance tightened lower, supporting longer-term margin structure .
  • Stars nuance: Four-star payment year tailwind expected in 2026 per management; for payment year 2027, CMS awarded 3.5 Stars for PPO and 4.0 for HMO, implying mixed quality bonus support thereafter .
  • Tech differentiation: Continued CA penetration and new AI features (ambient scribing) should support clinical quality, provider engagement, and cost management flywheel over time .
  • Trading implications: Expect heightened sensitivity to monthly/quarterly utilization signals and AEP/retention updates; confirmation of improving mix and steady cost trends could re-rate profitability expectations into 2026 .