Ladies and gentlemen, good afternoon, and welcome to the Clover Health Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 afternoon, everyone. Joining me on our call today to discuss the company's Second Quarter 2025 results are Andrew Toy, Clover Health's Chief Executive Officer; and Peter Kuipers, the company's Chief Financial Officer. You can find today's press release and accompanying supplemental slides as well as the company's most recent investor deck 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 patients 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 a 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. Welcome, everyone, to our Second Quarter Earnings Call. We are happy to report that we delivered yet another impactful quarter this year, building our momentum and demonstrating our ability to achieve meaningful growth alongside sustained adjusted EBITDA profitability in Medicare Advantage through the first half of the year. To start, I feel we are executing well against our strategy. We have always aimed to position Clover to win over the long term within Medicare Advantage and our arc has been simple: first, achieve profitability; then return to growth while sustaining profitability; and then leverage our differentiated model to accelerate growth and profitability together. We exceeded our adjusted EBITDA profitability target in 2024. Through the first half of 2025, we are executing well and believe that we are proving that we can achieve sustained adjusted EBITDA profitability amid to meaningful membership and revenue growth during a 3.5 star payment year. And most importantly, we expect that our performance in 2025 will position us very well to accelerate both growth and profitability in 2026, which is a 4-star payment year and where we will continue to offer our flagship-wide network PPO plan, while others retreat from that offering. Our trajectory is clear. We are confident in the path ahead. And while not all market plan data is available yet, we have reason to believe this will be another strong membership growth season for us. Potentially even stronger than this year. Also with next year being a 4-star payment year, we feel we should be able to strongly grow 2026 adjusted EBITDA as well. Next, let's discuss how our second quarter highlights our strategic arc and the significant value our technology-first care model brings to our members. As I mentioned, we're continuing to deliver robust membership and revenue growth this…

Thank you, Andrew. Before we get to the financials, I want to emphasize our strong position in today's managed care environment. We are demonstrating great Medicare panic execution, leading with a wide network PPO plan that currently serves 97% of our members. We have achieved over 30% membership growth, which is well above the industry, all while maintaining profitability on a 3.5 star payment year. We have outlined our year-over-year profitability drivers on Page 8 of the earnings deck posted to our IR website. We are absorbing typical new member growth headwinds through the strong economics of our returning cohorts. And while our favorable and growth SG&A cost is increasing,due to the strong growth, coupled with our strategic investments into our model, this is effectively balanced by ongoing cost efficiencies in our business, a topic I'll elaborate on later. Now diving into the financials. Our results reflect continued growth and momentum in Medicare Advantage with sustained adjusted EBITDA profitability through the first half of 2025. We've grown both membership and revenue by more than 30% year-over-year. And at the same time, we improved GAAP net loss from continuing operations by $4 million to $12 million, and maintained our year-to-date adjusted EBITDA and adjusted net income, steady at $43 million and $42 million, respectively. Our results powered by our technology-first model of care, reinforce confidence in achieving our updated full year 2025 guidance. We believe this also positions us well for accelerated growth and a meaningful increase in profitability in 2026, which is a 4-star payment year. Now let's move to a more detailed review of our second quarter financial performance drivers and our updated full year 2025 guidance. Clover's core fundamentals are strong with well above market insurance revenue and membership growth. Second quarter 2025 and Medicare Advantage membership grew…

Thanks, Peter. In conclusion, we have delivered significant growth this quarter amidst sustained adjusted EBITDA profitability, clearly executing our strategy. Our differentiated tech-first care model is consistently delivering value for members and enabling us to effectively manage costs and drive our strong performance. We remain confident in our full year 2025 performance and we believe we are strategically positioned for accelerated growth and sustained profitability unlocking Clover's full potential in the future. With that, let's open it up for questions.

[Operator Instructions] We will now take our first question from Jonathan Wong with UBS.

I guess to start, the MCR BER came in above kind of expectations here. I know you called out sub in Part D, but within the context of your raised guidance on the BER. How much conservatism do you kind of have embedded in there? And how much visibility do you have into how that trend will develop in the back half of the year?

Yes. Thanks, Jonathan, for the question. So the the increase in the DR guide for the full year is mostly related to Part D and supplemental, mostly actually dental. So that's a positive for for the members, we have initiatives in place to monitor this go forward. And we believe there's some relief as well on the Part D pressure from the IRA as we go into 2026.

Okay. And then within the context of what you saw -- when did these pressures kind of start emerging? Was it in the earlier part of the quarter, later part of the quarter? And then how much of this did you actually capture within the context of your bids for next year just given it does seem like a fairly sizable step up here.

Yes. I think that -- as I mentioned in my comments -- this is Andrew. The -- especially on the Part D side, one thing we've been tracking as we go through the year is that this is the first year of the IRA. So tracking against the model is something new across the industry, I think. So we did look at that we were pricing it to the bid. I think you can see that I think a lot field industry did that as well as reflected by the fact of the variability and increase in the Part D direct subsidy that came in for 2026. I do think that across the industry that higher Part D costs are being factored in as we start to look and rationalize that trend from earlier this year into our sort of like baseline models.

We'll go next to Matt Hewitt with Craig-Hallum Capital Group.

Maybe first up, you've increased showing improvement in your SG&A or adjusted SG&A. And I'm just curious, what are the drivers for those improvements. Are you kind of holding back on some of the hiring? Or are you finding some new efficiencies within the model? Any color there would be helpful.

Yes, Matt, thanks for the question. Yes. So mostly cost efficiencies, we started a company-wide cost initiative to really rationalize the price and volume terms we get with most of our partnership contracts. Now that we are growing well off the industry, and we're estimating that same growth also to remain for the next couple of years. So we're very -- we are a very attractive partner -- so a lot of that also comes from term renegotiations with partners. .

Got it. And then maybe kind of a separate question here. But what kind of response have you been getting from the COPD white paper? Is that something that you can replicate? Are there other similar types of papers that you can publish that kind of highlight the benefits of using CA and kind of driving incremental business?

Yes, definitely. We're very proud of these papers that we're putting out. Obviously COP just came out. We had CHF maybe about a month, I think 2 ago. Our flagship paper on CKD came out, I think, last year or the year before. we plan to keep producing this material, and we think that Clover Assistant definitely in our data shown to be as you can see the white paper is correlated with management, care, total cost of care. You can see that in our -- our HEDIS scores, which remain one at the top in the country. There's a lot of these data points, which we're very, very proud of. It also flows into how we're talking about being in the counterpart context as well, where we point to these results that are being driven by our technology with our own plan, and it's something that we can bring to other plans in other markets. .

[Operator Instructions] We'll go next to John Pinney with penny Canaccord Genuity.

Joining in on for Richard Close. Yes, so going back to the BER, is the elevated cost trend you're seeing like kind of more localized in that like on a newer cohort? Or is it pretty broad based? Is there any differences in geography there? Is it -- again, pretty broad-based?

Yes, this is Pete. I'll answer that question. So the cohorts are -- want to make sure that, that message is clear and land. The cohorts in our unique model, tech-first model are performing as expected in line. So for Part D and supplemental, we don't see a specific split or between new and returning members. So returning members are definitely improving from an MCR and BER perspective as expected.

And I would also add in there that, as we said on our previous commentary, as we model out parts, especially the Part D side of things, which was in my section, this is the first year. We are still figuring out what the baseline models look like. the direct subsidy will increase going to 26. So as Peter mentioned, like I think there's reason to believe that any pressures we see there will be appropriately priced in industry-wide going into next year as well. And we are also making sure that we keep an eye on supplemental benefits throughout the year.

Okay. Great. And then also just to touch on like the competitive landscape and the upcoming AEP. Is there anything like different that you'd call out on how your competitors are approaching this year going into 2026? Are they like maybe pulling back a little bit less than they did last year? Or anything you would call out on any differences in the competitive landscape compared to your .

Yes, for sure. I think that, obviously, we're noting that cost trends like within managed care in general and even Medicare Advantage, there's been a lot of motion this year by the national players. The way that we see it is that the products that they're most pulling back, while all of them pretty much are pulling back to some extent, where they're pulling back count and where they're pulling back is generally within that PPO, white work they struggle to deploy their existing managed care capabilities I think that's an area where we are very strong based upon our technology from the counterpart side. So we feel good in our core markets, we feel that that people are pulling back, they're quite likely to pull back within those same markets because those are challenging for the same reasons that they're good for us. So that's why within our commentary, we said that while we don't have all the data yet, we feel like we're likely to be very well placed into this coming growth season.

And I would add to that as well to point out next year 2026, is a 4-star payment here. So that's also a financial headwind allowing us to grow.

[Operator Instructions] And now we'll conclude the Q&A portion of today's conference. I would now like to turn the call back over to Andrew Toy for any additional or closing remarks.

Fantastic. I want to thank everybody for joining us today. Thank you for taking the time and for your questions. Truly value everyone's interest in Clover Health. And we'll be speaking with everyone again soon. Thanks again, and enjoy the rest of your evening.

Thank you. This concludes today's Clover Health Second Quarter 2025 Earnings Call and webcast. You may disconnect your line at this time. Have a wonderful day.