SEC Filing | Clover Health

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clov-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________________________

FORM 10-Q

________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-39252

________________________________________

Clover Health Investments, Corp.

(Exact Name of Registrant as Specified in its Charter)

________________________________________


Delaware			98-1515192
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3401 Mallory Lane, Suite 210 Franklin, Tennessee			37067
(Address of principal executive offices)			(Zip Code)

Registrant's telephone number, including area code: (201) 432-2133

________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

CLOV

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 2, 2022, the registrant had 383,548,896 shares of Class A Common Stock, $0.0001 par value per share, and 94,394,852 shares of Class B Common Stock, $0.0001 par value per share, issued and outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	5

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity	8
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION	45

Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46



















Signatures

As used in this report, "Company," "Clover," "Clover Health," "we," "us," "our," and similar terms refer to Clover Health Investments, Corp. and its consolidated subsidiaries, unless otherwise noted or the context otherwise requires.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements contained in this document other than statements of historical fact, including statements regarding our future results of operations, financial position, market size and opportunity, our business strategy and plans, the factors affecting our performance and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "should," "would," "can," "expect," "project," "outlook," "forecast," "objective," "plan," "potential," "seek," "grow," "target," "if," and the negative or plural of these words and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including the risk factors described in our filings with the Securities and Exchange Commission (the "SEC"). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this document may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements contained in this document involve a number of judgments, risks and uncertainties, including, without limitation, risks related to:

•our expectations regarding results of operations, financial condition, and cash flows;

•our expectations regarding the development and expansion of our Insurance and Non-Insurance businesses;

•our ability to successfully enter new service markets and manage our operations;

•anticipated trends and challenges in our business and in the markets in which we operate;

•our ability to expand our beneficiary base and provider network;

•our ability to maintain and increase adoption and use of Clover Assistant;

•the anticipated benefits associated with the use of Clover Assistant, including our ability to utilize the platform to manage our medical care ratios;

•our ability to develop new features and functionality that meet market needs and achieve market acceptance;

•our ability to retain and hire necessary employees and staff our operations appropriately;

•the timing and amount of certain investments in growth;

•the effect of uncertainties related to the global COVID-19 pandemic on our business, results of operations, and financial condition;

•the outcome of any known and unknown litigation and regulatory proceedings;

•any current, pending, or future legislation, regulations or policies that could have a negative effect on our revenue and businesses, including rules, regulations, and policies relating to healthcare and Medicare;

•our ability to maintain or improve our Star Ratings or otherwise continue to improve the financial performance of our business;

•our ability to maintain, protect, and enhance our intellectual property; and

•general economic conditions and uncertainty, including the societal and economic impact of the COVID-19 pandemic and its variants, inflation, and geopolitical uncertainty and instability.

We caution you that the foregoing list of judgments, risks, and uncertainties that may cause actual results to differ materially from those in the forward-looking statements may not be complete. You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur or may be materially different from what we expect. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we undertake no obligation to update any of these forward-looking statements after the date of this document or to conform these statements to actual results or revised expectations.

This document contains estimates, projections, and other information concerning our industry, our business, and the markets for our products. We obtained the industry, market, and similar data set forth in this document from our own internal estimates and research and from industry research, publications, surveys, and studies conducted by third parties, including governmental agencies, and such information is inherently subject to uncertainties. Actual events or circumstances may differ materially from events and circumstances that are assumed in this information. You are cautioned not to give undue weight to any such information, projections, or estimates.

As a result of a number of known and unknown risks and uncertainties, including without limitation, the important factors described in our reports filed with the SEC, including the discussion under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements.

Additional Information

Our website address is www.cloverhealth.com. Our filings with the SEC are posted on our website and available free of charge as soon as reasonably practical after they are electronically filed with, or furnished to, the SEC. The content on our website or on any other website referred to in this document is not incorporated by reference in this document. Further, the Company's references to website URLs are intended to be inactive textual references only.

Channels for Disclosure of Information

Investors and others should note that we routinely announce material information to investors and the marketplace using filings with the SEC, press releases, public conference calls, presentations, webcasts, and the investor relations page of our website. We use the investor relations page of our website for purposes of compliance with Regulation FD and as a routine channel for distribution of important information, including news releases, analyst presentations, financial information, and corporate governance practices. We also use certain social media channels as a means of disclosing information about the Company and our products to our customers, investors, and the public, including @CloverHealth and #CloverHealth on Twitter, and the LinkedIn account of our President, Andrew Toy. The information posted on social media channels is not incorporated by reference in this report or in any other report or document we file with the SEC. While not all of the information that we post to the investor relations page of our website or to social media accounts is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in the Company to review the information that we share at the "Investors" link located on our webpage at https://investors.cloverhealth.com/investor-relations and to sign up for and regularly follow our social media accounts. Users may automatically receive email alerts and other information about the Company when enrolling an email address by visiting "Email Alerts" in the "Investor Resources" section of our website at https://investors.cloverhealth.com/investor-relations.

Part I

Item 1. Financial Statements and Supplementary Data

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)


	September 30, 2022 (Unaudited)		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	382,869	$	299,968
Short-term investments	153,799		293,851
Investment securities, available-for-sale (Amortized cost: 2022: $179,774; 2021: $21,142)	175,116		21,131
Investment securities, held-to-maturity (Fair value: 2022: $0; 2021: $307)	—		305
Accrued retrospective premiums	13,894		34,923
Other receivables	23,085		14,282
Healthcare receivable	58,886		48,042
Non-Insurance performance year receivable	585,901		—
Surety bonds and deposits	11,844		12,613
Prepaid expenses	17,816		9,409
Other assets, current	36,782		18,022
Total current assets	1,459,992		752,546

Investment securities, available-for-sale (Amortized cost: 2022: $76,339; 2021: $177,527)	70,237		175,604
Investment securities, held-to-maturity (Fair value: 2022: $596; 2021: $364)	700		335
Equity method investment	970		—
Property and equipment, net	2,526		2,287
Operating lease right-of-use assets	4,259		5,367
Goodwill and other intangible assets	4,233		4,233
Other assets, non-current	14,762		10,432
Total assets	$	1,557,679	$	950,804

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)


	September 30, 2022 (Unaudited)		December 31, 2021
Liabilities and Stockholders' Equity
Current liabilities
Unpaid claims	$	140,276	$	138,604
Due to related parties, net	1,661		2,320
Non-Insurance performance year obligation, current	655,849		36,891
Non-Insurance payable	147,132		37,773
Accounts payable and accrued expenses	37,735		28,129
Accrued salaries and benefits	19,636		15,147
Deferred revenue	96,358		—
Operating lease liabilities	2,000		3,059

Premium deficiency reserve	27,657		110,628
Other liabilities, current	42		73
Total current liabilities	1,128,346		372,624


Notes and securities payable, net of discounts and deferred issuance costs	19,965		19,938


Long-term operating lease liabilities	4,267		4,830
Other liabilities, non-current	13,121		14,095
Total liabilities	1,165,699		411,487
Commitments and Contingencies (Note 15)

Stockholders' equity
Class A Common Stock, $0.0001 par value; 2,500,000,000 shares authorized as of September 30, 2022, and December 31, 2021; 383,526,634 and 352,645,626 issued and outstanding as of September 30, 2022, and December 31, 2021, respectively	37		34
Class B Common Stock, $0.0001 par value; 500,000,000 shares authorized as of September 30, 2022, and December 31, 2021; 94,394,852 and 118,206,768 issued and outstanding as of September 30, 2022, and December 31, 2021, respectively	9		12
Additional paid-in capital	2,280,697		2,154,187
Accumulated other comprehensive loss	(10,760)		(1,934)
Accumulated deficit	(1,871,536)		(1,616,738)
Less: Treasury stock, at cost; 2,041,948 and 14,730 shares held as of September 30, 2022, and December 31, 2021, respectively	(6,467)		(147)
Clover stockholders' equity	391,980		535,414
Noncontrolling interest	—		3,903
Total stockholders' equity	391,980		539,317
Total liabilities and stockholders' equity	$	1,557,679	$	950,804

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(Dollars in thousands, except per share and share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Premiums earned, net (Net of ceded premiums of $116 and $120 for the three months ended September 30, 2022 and 2021, respectively; net of ceded premiums of $354 and $370 for the nine months ended September 30, 2022 and 2021, respectively)	$	267,892	$	203,657	$	814,566	$	598,390
Non-Insurance revenue	585,311		222,647		1,757,579		439,020
Other income	3,614		859		5,751		2,550
Total revenues	856,817		427,163		2,577,896		1,039,960

Operating expenses:
Net medical claims incurred	839,799		436,325		2,560,307		1,109,248


Salaries and benefits	70,142		73,364		209,724		201,555
General and administrative expenses	47,832		45,846		152,569		130,110
Premium deficiency reserve (benefit) expense	(27,657)		20,761		(82,971)		48,661
Depreciation and amortization	616		120		2,028		398
Other expense	—		—		—		191
Total operating expenses	930,732		576,416		2,841,657		1,490,163
Loss from operations	(73,915)		(149,253)		(263,761)		(450,203)

Change in fair value of warrants payable	—		(115,152)		—		(66,146)
Interest expense	404		404		1,197		2,790
Amortization of notes and securities discounts	9		22		27		13,708

Loss (gain) on investment	980		—		(10,187)		—
Net loss	$	(75,308)	$	(34,527)	$	(254,798)	$	(400,555)

Per share data:
Net loss per share attributable to Class A and Class B common stockholders – basic and diluted (1)	$	(0.16)	$	(0.08)	$	(0.54)	$	(0.98)

Weighted average number of common shares outstanding
Basic and diluted weighted average number of Class A and Class B common shares and common share equivalents outstanding (1)	477,690,204		414,572,706		475,609,571		410,417,493


Net unrealized loss on available-for-sale investments	$	(2,407)	$	(197)	$	(8,826)	$	(620)
Comprehensive loss	$	(77,715)	$	(34,724)	$	(263,624)	$	(401,175)

(1) Because the Company had a net loss during the three and nine months ended September 30, 2022 and 2021, the Company's potentially dilutive securities, which include stock options, restricted stock, preferred stock, and warrants to purchase shares of common stock and preferred stock, have been excluded from the computation of diluted net loss per share, as the effect would be anti-dilutive.

The accompanying notes are an integral part of these condensed consolidated financial statements.

CLOVER HEALTH INVESTMENTS, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Unaudited)

(Dollars in thousands, except share amounts)


	Convertible Preferred stock			Class A Common Stock (1)			Class B Common Stock (1)			Treasury Stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total stockholders' equity (deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount










Balance, December 31, 2020	139,444,346	$	447,747	—	$	—	89,206,266	$	9	—	$	—	$	411,867	$	(1,028,982)	$	10	$	3,903	$	(613,193)


Stock issuance for exercise of stock options, net of early exercise liability	—	—		761,480	—		—	—		—	—		1,282		—		—		—		1,282
Stock-based compensation	—	—		—	—		—	—		—	—		42,713		—		—		—		42,713
Unrealized holdings loss on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		(493)		—		(493)
Preferred stock conversion	(139,444,346)	(447,747)		—	—		139,444,346	14		—	—		447,733		—		—		—		447,747
Issuance of common stock related to exercises of legacy warrants	—	—		—	—		7,205,490	1		—	—		97,781		—		—		—		97,782
Convertible debt conversion and other issuances	—	—		—	—		75,084,703	7		—	—		16,052		—		—		—		16,059
Issuance of common stock in connection with Business Combination and PIPE offering	—	—		146,373,904	15		(49,975,104)	(5)		—	—		666,232		—		—		—		666,242
Conversion from Class B Common Stock to Class A Common Stock	—	—		1,143,863	—		(1,143,863)	—		—	—		—		—		—		—		—
Capital contribution for extinguishment of debt	—	—		—	—		—	—		—	—		126,795		—		—		—		126,795
Acquisition of public and private placement warrants	—	—		—	—		—	—		—	—		(147,582)		—		—		—		(147,582)
Net loss	—	—		—	—		—	—		—	—		—		(48,417)		—		—		(48,417)
Balance, March 31, 2021	—	$	—	148,279,247	$	15	259,821,838	$	26	—	$	—	$	1,662,873	$	(1,077,399)	$	(483)	$	3,903	$	588,935
Stock issuance for exercise of stock options, net of early exercise liability	—	—		204,366	—		—	—		—	—		435		—		—		—		435
Stock-based compensation	—	—		—	—		—	—		—	—		43,026		—		—		—		43,026
Unrealized holdings gain on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		70		—		70
Conversion from Class B Common Stock to Class A Common Stock	—	—		77,364	—		(77,364)	—		—	—		—		—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—		(317,611)		—		—		(317,611)
Balance, June 30, 2021	—	$	—	148,560,977	$	15	259,744,474	$	26	—	$	—	$	1,706,334	$	(1,395,010)	$	(413)	$	3,903	$	314,855
Stock issuance for exercise of stock options, net of early exercise liability	—	—		2,893,802	—		—	—		—	—		3,830		—		—		—		3,830
Stock-based compensation	—	—		—	—		—	—		—	—		46,803		—		—		—		46,803
Vested restricted stock units	—	—		34,888	—		—	—		—	—		—		—		—		—		—
Unrealized holdings loss on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		(197)		—		(197)
Conversion from Class B Common Stock to Class A Common Stock	—	—		117,425,763	12		(117,425,763)	(12)		—	—		—		—		—		—		—
Issuance of common stock related to exercises of public and private placement warrants	—	—		9,408,264	1		—	—		—	—		81,672		—		—		—		81,673
Treasury Stock	—	—		(14,730)	—		—	—		14,730	(147)		—		—		—		—		(147)
Net loss	—	—		—	—		—	—		—	—		—		(34,527)		—		—		(34,527)
Balance, September 30, 2021	—	$	—	278,308,964	$	28	142,318,711	$	14	14,730	$	(147)	$	1,838,639	$	(1,429,537)	$	(610)	$	3,903	$	412,290


	Convertible Preferred stock			Class A Common Stock (1)			Class B Common Stock (1)			Treasury Stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Noncontrolling interest		Total stockholders' equity (deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, December 31, 2021	—	$	—	352,645,626	$	34	118,206,768	$	12	14,730	$	(147)	$	2,154,187	$	(1,616,738)	$	(1,934)	$	3,903	$	539,317
Stock issuance for exercise of stock options, net of early exercise liability	—	—		151,620	—		—	—		—	—		331		—		—		—		331
Stock-based compensation	—	—		—	—		—	—		—	—		40,640		—		—		—		40,640
Vested restricted stock units	—	—		2,275,946	—		1,677,873	—		—	—		—		—		—		—		—
Vested performance restricted stock units	—	—		8,951	—		—	—		—	—		—		—		—		—		—
Unrealized holdings loss on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		(5,324)		—		(5,324)
Conversion from Class A Common Stock to Class B Common Stock	—	—		25,436,433	3		(25,436,433)	(3)		—	—		—		—		—		—		—


Treasury stock acquired	—	—		(1,879,063)	—		—	—		1,879,063	(5,939)		—		—		—		—		(5,939)
Issuance of common stock under Employee Stock Purchase Plan	—	—		214,797	—		—	—		—	—		—		—		—		—		—
Derecognition of noncontrolling interest	—	—		—	—		—	—		—	—		—		—		—		(3,903)		(3,903)
Net loss	—	—		—	—		—	—		—	—		—		(75,309)		—		—		(75,309)
Balance, March 31, 2022	—	$	—	378,854,310	$	37	94,448,208	$	9	1,893,793	$	(6,086)	$	2,195,158	$	(1,692,047)	$	(7,258)	$	—	$	489,813
Stock issuance for exercise of stock options, net of early exercise liability	—	—		4,016,336	—		—	—		—	—		563		—		—		—		563
Stock-based compensation	—	—		—	—		—	—		—	—		41,927		—		—		—		41,927
Vested restricted stock units	—	—		122,672	—		—	—		—	—		—		—		—		—		—

Treasury stock acquired	—	—		(37,744)	—		—	—		37,744	(105)		—		—		—		—		(105)
Unrealized holdings gain on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		(1,095)		—		(1,095)
Conversion from Class A Common Stock to Class B Common Stock	—	—		53,040	—		(53,040)	—		—	—		—		—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—		(104,181)		—		—		(104,181)
Balance, June 30, 2022	—	$	—	383,008,614	$	37	94,395,168	$	9	1,931,537	$	(6,191)	$	2,237,648	$	(1,796,228)	$	(8,353)	$	—	$	426,922
Stock issuance for exercise of stock options, net of early exercise liability	—	—		190,052	—		—	—		—	—		408		—		—		—		408
Stock-based compensation	—	—		—	—		—	—		—	—		42,641		—		—		—		42,641
Vested restricted stock units	—	—		438,063	—		—	—		—	—		—		—		—		—		—

Treasury stock acquired	—	—		(110,411)	—		—	—		110,411	(276)		—		—		—		—		(276)
Unrealized holdings gain on investment securities, available-for-sale	—	—		—	—		—	—		—	—		—		—		(2,407)		—		(2,407)
Conversion from Class A Common Stock to Class B Common Stock	—	—		316	—		(316)	—		—	—		—		—		—		—		—
Net loss	—	—		—	—		—	—		—	—		—		(75,308)		—		—		(75,308)
Balance, September 30, 2022	—	$	—	383,526,634	$	37	94,394,852	$	9	2,041,948	$	(6,467)	$