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Good morning. My name is Ellie, and I will be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded. [Operator Instructions] Thank you. I will now turn the conference over to Chris Potochar, Vice President of Treasury and Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us for our first quarter 2024 earnings call. Mark Bertolini, Oscar's Chief Executive Officer; and Scott Blackley, Oscar's Chief Financial Officer, will host this morning's call. This call can also be accessed through our Investor Relations website at ir.hioscar.com. Full details of our results and additional management commentary are available in our earnings release, which can be found on our Investor Relations website at ir.hioscar.com. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in our annual report on Form 10-K for the period ended December 31, 2023, filed with the SEC, and other filings with the SEC, including our quarterly report on Form 10-Q for the quarterly period ended March 31, 2024, to be filed with the SEC. Such forward-looking statements are based on current expectations as of today. Oscar anticipates that subsequent events and developments may cause estimates to change. While company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. The call will also refer to certain non-GAAP measures. A reconciliation of these measures to the most directly comparable GAAP measures can be found in the first quarter earnings press release available on the company's Investor Relations website at ir.hioscar.com. With that, I would like to turn the call over to our CEO, Mark Bertolini.

Good morning. Thank you, Chris, and thank you, all, for joining us. This morning, Oscar reported strong first quarter results with solid year-over-year improvement across all core metrics. Underlying our first quarter performance, we reported total revenue of $2.1 billion. Our revenue increased 46% year-over-year led by strong retention, above-market membership growth during open enrollment, and SEP member additions. Oscar achieved an important milestone in the quarter. We reported positive net income for the first time in our history. We generated $178 million of net income, a significant $217 million improvement year-over-year. Medical loss ratio improved 210 basis points year-over-year to 74.2%. Overall utilization was in line with our expectations. In addition, we achieved total company adjusted EBITDA of $219 million, a $168 million improvement versus the prior year. Our strong momentum positions us to deliver on our total company adjusted EBITDA profitability target this year. We're seeing real earnings power in our insurance business. The business has scaled to a point where we are driving strong membership growth and improved profitability. We are delivering on our commitments and we remain on a solid path to grow sustainably over the long-term. In a few moments, Scott will provide a more detailed review of our first quarter results. First, I will cover key business highlights. Oscar closed the quarter with a strong 2024 open enrollment period, alongside record enrollment in the ACA marketplace. Total membership increased 42% year-over-year, exceeding our expectations. We captured share in existing and expansion markets and drove superior customer satisfaction and record high retention. Our growth demonstrates that our value proposition continues to resonate with consumers. Oscar's affordable and personalized plans driven by our disciplined pricing and total cost of care initiatives attract consumers. Our superior member experience driven by our technology retains them. We ended the quarter with another record high NPS of 66. During the quarter, we continued to meet consumer needs through our technology. We drove more members to affordable, benefit-rich plans in key states [ for ] other carriers retreated, including Georgia and Kansas. We also launched new products for our fast-growing and diverse member population, which attracted differentiated member profiles in several new geographies. As an example, we launched our Spanish-first program, Hola Oscar, to better support our Hispanic and Latino member base in Georgia. The program drives personalized care interventions through our engagement capabilities in their native language. Early results show 247% growth and 93% retention in our Spanish-speaking membership in Georgia in just 1 year. Our teams also successfully launched diabetes-focused campaigns through Hola Oscar. Hispanic adults are 70% more likely than non-Hispanic adults to be diagnosed with diabetes. Our campaigns introduced culturally relevant messaging to increase diabetes screening rates, including eye exams and kidney screenings, [ and ] closed gaps in care. Tailored health engagement programs like these help drive our strong NPS of 87 among Spanish speakers. Finally, we continue to externalize key aspects of our member engagement and experience capabilities to power the healthcare system through +Oscar. Our efforts are gaining traction. In the quarter, all of our clients added more lives to our campaign builder platform, including a key provider group that expanded the relationship by 35,000 lives. We are pleased with +Oscar's momentum. We continue to mature the product set and have an active RFP pipeline. Our strong performance in the quarter sets a solid foundation for 2024 and positions us to achieve our total company-adjusted EBITDA profitability goal. Looking ahead, we remain focused on long-term strategic priorities that enable Oscar to play a leading role in expanding the individual market. The ACA now has more than 21 million people enrolled and is the fastest-growing health insurance segment driven by the gig economy, consumerization, and government policies. The market has reached a size that makes it a permanent, attractive option, supporting our country's most diverse and vulnerable populations, filling a critical gap in the insurance market. The ACA's continued growth affirms that individual plans meet consumer needs of affordability, access, and quality, and are a viable alternative to the conventional employer-based models. We see a long-term opportunity to grow the individual market by serving a broader set of consumers and markets. With this in mind, we are not renewing the Cigna +Oscar small group offering in 2025, but are aligned with our strategic direction. We continue to believe in the value of small businesses and look forward to serving this market in new ways in the future. In summary, we are off to a good start in 2024. Oscar is building a highly competitive franchise in the ACA market, and the business has a sizable runway ahead to further scale and grow. We continue to execute, drive the excellence required to run a mature company, and generate solid business returns. I am confident in Oscar's long-term growth prospects. We look forward to sharing more details on our long-term strategic plan, including our [ ACA ] strategy at Oscar's upcoming Investor Day on June 7 in New York. With that, I will turn the call over to Scott. Scott?

Thank you, Mark, and good morning, everyone. Our first quarter financial results demonstrate a solid start to the year. We continue to deliver on our commitments and reported approximately $178 million of net income in the first quarter or $0.62 per diluted share, an important milestone for Oscar. We're well-positioned to achieve our target for total company adjusted EBITDA profitability this year. Before I get into the details of our financial performance this quarter, as a reminder, we implemented a new financial reporting structure beginning with the first quarter in order to increase transparency and improve comparability. Our discussion of financial results and guidance is focused on performance of the total company. In conjunction with today's earnings release, we filed an 8-K, which includes supplemental information on 2023 quarterly results under our new financial reporting framework. Turning to our financial performance. Total revenue increased 46% year-over-year to $2.1 billion in the first quarter, driven by higher membership, rate increases, and lower risk adjustment as a percentage of premiums. We ended the quarter with more than 1.4 million members, an increase of 42% year-over-year. Membership growth was driven by strong retention, growth in existing markets and new service areas, as well as robust SEP member additions. On medical costs, the first quarter medical loss ratio improved by 210 basis points year-over-year to 74.2%, driven by our disciplined pricing strategy and total cost of care initiatives. Overall, utilization trends were in line with our expectations at this point in the year. Switching to administrative costs. The first quarter SG&A expense ratio significantly improved by approximately 870 basis points year-over-year to 18.4%. This significant year-over-year improvement was driven by variable cost efficiencies and improved fixed cost leverage, as well as lower risk adjustment as a percentage of premiums, which collectively resulted in 505 basis points over -- year-over-year improvement in the ratio. The remaining 365 basis points of improvement was due to accelerated stock-based compensation expense recognized as a result of the cancellation of the Founders' Awards, which we recognized in the prior year period. We continue to make significant progress on improving profitability. Net income of approximately $178 million was significantly improved by $217 million year-over-year in the first quarter. Total company adjusted EBITDA of $219 million also significantly improved by $168 million year-over-year in the first quarter. Shifting to the balance sheet. Our capital position remains very strong. We ended the first quarter with approximately $3.7 billion of cash and investments, including $159 million of cash and investments at the parent. As of March 31, 2024, our insurance subsidiaries had approximately $990 million of capital in surplus, including $540 million of excess capital, which was driven by our strong operating performance. Turning now to our 2024 full-year guidance. Based on the first quarter results, we are reaffirming all of our full-year guidance metrics. We expect total revenues in the range of $8.3 billion to $8.4 billion, medical loss ratio in the range of 80.2% to 81.2%, and SG&A expense ratio in the range of 20.5% to 21%. We continue to expect to achieve total company adjusted EBITDA profitability in the range of $125 million to $175 million. As a reminder, as the new policy year matures, our overall per member claims levels may change with corresponding impacts to our estimate for risk transfer. Such changes would impact the numerator and the denominator of the MLR, but we would not expect them to have an impact on our per member underwriting economics. In addition, we continue to expect our quarterly MLR seasonality to be similar to 2023, although with a steeper slope. In closing, we've had a solid start to the year. We delivered net income profitability for the first time in Oscar's history, and we are well-positioned to achieve total company adjusted EBITDA profitability this year. With that, let me turn the call back over to Mark for closing remarks.

Thank you, Scott. In closing, our first quarter performance lays a strong foundation for 2024. Oscar continues to deliver on our commitments, and I can see the momentum in our business. We are confident we will achieve our total company adjusted EBITDA goal this year. Our team remains focused on our long-term growth objectives, which position us to capture emerging innovation opportunities in healthcare. Oscar is purpose-built to meet the rising expectations of consumers and bring the market more tech-first solutions. I want to thank all of our employees for their efforts in delivering another strong order. As I walk the halls, I feel our team's dedication and passion. Their commitment to serving our members and partners drives our continued results, which we laid out in our impact report last month. We continue to build a more sustainable and equitable future, both at Oscar and in the communities we serve. I look forward to speaking with many of you at our Investor Day next month. With that, I will turn the call over to the operator for the Q&A portion of our call.

[Operator Instructions] Our first question comes from Stephen Baxter of Wells Fargo.

So, I wanted to get an update on the expectations around the performance of your membership growth in 2024. I guess, how is the mix of those numbers compared to your expectations? And can you update us on where you sit in terms of metal mix and how that's changed year-over-year? And then I guess the last question would just be, it sounds like you're not necessarily expecting risk adjustment to be a big swing factor in terms of the guidance and where you sit for the full year. Obviously, the first quarter, I think, looks like a pretty solid starting point to kind of use your [ phrasing ]. What would you need to see in order to let the upside that it feels like you saw in the first quarter flow through the guidance?

Thanks, Steve. We reported 1.4 million members and that's been stronger SEP growth than we expected this early in the year. We're not sure if that's a pull forward of what's going to happen later in the year or it will continue to grow over time. And as we look at that growth rate, if it is longer over time, Medicaid redetermination is through November, we would expect that we're going to have less and less insight on risk adjusters later in the year, which will work against us in the quarters, but we'll recover in the first quarter of next year when we get that data all submitted through CMS. Scott?

Yes. So, Steve, number 1, I think that we're super excited about a strong first quarter, strong membership growth, medical expenses on plan. SG&A, that was slightly favorable to what we were expecting. So a good start to the year. With respect to the SEP membership growth, as we told you in our call, at the end of the year for Q4, we did anticipate in our plan that we would see strong SEP growth. And that growth typically has an MLR that's about 10% higher than what we would see in OE. We have a history of retaining a high portion of those members. So in the next year, they tend to have MLRs that look just like other OE members. So grabbing that SEP this year is a good thing for 2025. In the current year, as Mark talked about, the big question for us at the moment is, we saw really robust SEP membership growth in Q1. And is that a trend that's going to persist or is that a pull forward of membership? At this point in time we just don't have enough visibility to know for certain. And so that's impacting a little bit of our full year guidance and thinking about if we do see more SEP growth, in the back half that will come with some MLR impacts, and we just think we've got a great position to start the year with a strong first quarter.

Our next question comes from Adrian Wong from Bank of America.

I think in the past you've mentioned that you don't want Oscar to be a single product line company, but this quarter you're exiting Medicare Advantage, and it sounds like exiting the Cigna and Oscar small group relationship. So we'd love to hear a little bit more color on what exactly is the rationale behind the exit for first Cigna + Oscar, and then to the extent you still believe that the company won't be a single product line business? Like what are the major opportunities? Is it health IT, and do you see [ ICHRA ] as a separate line? So more color on what you expect from those 2 businesses, just because it seems like the services revenue only grew like 12% in the quarter. So would just love to hear longer term what the expectations around that are, or if there are things beyond ICHRA and health IT that you see opportunity in?

Thanks, Adrian. We did pull out of Medicare in large part because the provider relationships we had in place were unsustainable, and there wasn't anything we could do to fix them from the standpoint of getting to a profitable product. We do anticipate entering the market a different way, which we'll talk about in June when we have our Investor Day. But the near-term opportunity for us is ICHRA, and with ICHRA we believe we have access to over 70 million lives in the under 50 and middle market segments, and we'll talk a lot about the significant progress we've made on that set of products and the pilots we'll be doing this year and launching in the '25. I think on C + O, we tried -- both companies tried very hard over the last 5 years to get the thing to a place where from an underwriting standpoint it was profitable. I think owner economics get in the way when you have different pieces of the revenue stream going to different organizations. And we just couldn't rationalize that in a way that would make the product work longer term. But more importantly, we believe ICHRA is the solution for small group and middle market, and we believe that, that will be a much bigger opportunity we want to focus on getting that right. +Oscar, we have work going on now about how we use that platform -- externalized platform. We need work and investment on it in order to make sure it's ready for the market in a way that clients can use it appropriately as a full platform. So today we're rolling out components. We'll have more to say about +Oscar when we get to the Investor Day at June 7th.

The next question comes from John Ransom from Raymond James.

Just looking at your SG&A line, as you look out a few years, what do you think is the sustainable level of SG&A to revenue to kind of get you to your ultimate targeted margin?

Yes, John, thanks for the question. Look, we certainly were excited about the performance of SG&A, year-over-year significant improvement in that line item. And the improvement there -- obviously we called out the one timer related to the Founders Award, but the rest of the improvement is sticky and we'll continue going forward seeing a lot of impacts of our technology, making our operations more efficient. We're seeing fixed cost leverage, and those are 2 things that I think will continue for us. And so we'll get into more of where we think our destination economics are for the business at the Investor Day, but I would say that we anticipate that there's still more improvement than that we will expect in SG&A over the future and the trends that we've seen thus far give us confidence that we'll be able to continue to drive it to even better level to the future.

The next question comes from Josh Raskin from Nephron.

Just first clarification on Cigna + Oscar. What's the revenue expectation this year embedded in the $8.3 billion to $8.4 billion? And then my real question is just on the risk adjuster payable down meaningfully year-over-year despite the increase in premiums. I know that was all expected, but I'm curious if you've got any external data at this point that's sort of a first look, or anything preliminary from Blackley or anyone else? And then how much of that improvement do you think is just better execution and coding? And how much of that is your membership sort of a more normal risk pool?

Okay. I'm sure I'm going to miss one of those questions Josh, but I'll comment on the risk transfer. So risk transfer at this point in the year is mainly an internal estimate. We don't have a lot of external data. The risk transfer will -- we're expecting that the percentage of risk transfer is going to increase throughout the year. A part of that's just driven by seasonality of the book, but there's also SEP members come in. They have -- typically they're younger and we end up having a higher risk transfer with that group. And so, as we are expecting SEP growth throughout the year into the second half, that will drive risk transfer going up. So at this point I would say that we have a very good process for collecting the codes that we need to support risk transfer. I think that, that's an area that having a lot of history in [indiscernible]. We've got some very strong processes, including deployment of AI and other techniques that allow us to get things in a very efficient way. And we deliver a lot of value in that process. So we feel good about the opportunity for us to convert, making certain that we get full credit for the medical care that our members are receiving.

And then just a C + O revenues?

Sorry, that was the one I forgot. On +O -- on C + O, I think that for 2024, that's probably in the range of $250 million to $260 million of revenue bottom line, has minimal impact bottom line and going forward, when that book goes into runoff in 2025, it'll be a much smaller revenue impact, but in both years we would expect the bottom line to be insignificant.

Next question comes from Nathan Rich from Goldman Sachs.

Maybe just following up on the MLR. Scott, it seems like the underlying cost trend performance was in line with your expectations. And you kind of mentioned the steeper slope. And I'd just be curious kind of how that MLR compared to your plan in the first quarter and any change in how you're thinking about cadence over the balance of the year? And then longer term, maybe how you're seeing the long-term opportunity for MLR? I know some of your peers kind of operate in the high 70% range. Is that -- do you feel like you can get to a level with your member mix and geographic exposure that would be more consistent with kind of those peer levels over time?

Nathan, on MLR, I think that the MLR we saw in the first quarter was more or less consistent with our expectations where we saw utilization that was on plan. There's always puts and takes in utilization, but in summary, pretty much what we were anticipating. At this point in the year, you don't have that huge amount of visibility into the full year performance of your book. And so it's still early days in terms of what we would take away from the performance thus far in the year. But I would say that it's comforting that we're seeing what we expected. So we do think that first quarter MLR is a good starting point. For the rest of the year, there is MLR seasonality. We've seen this historically in our business and we would expect it to be there again this year. The addition of SEP members throughout the year, we've talked about the risk adjustment dynamics of those members that do have some adverse effects. And so that's another component of seasonality and I think that we'll see that this year. With respect to MLR in the future, I would say that there's 2 components of that. One is your pricing, and we are always committed to making sure that we maintain disciplined pricing and that we have a price point that allows us to achieve the growth objectives that we want. So we balance those things out. I think we've got opportunities in total cost of care for us to continue to improve medical expenses in a way that we always wanted to support our members. And so we think we see opportunities to continue to drive that down. But ultimately, we will balance out the objectives of having a pricing in the market that allows us to grow and driving total cost of care that can lead into a trend of expenses over time. But really there's no reason that our business can't perform at MLR levels that are competitive with the rest of our industry peers.

Our next question comes from John Ransom from Raymond James.

I want you to know I follow the rules and just ask one question. So yes, give me a gold star. On the MLR question, if we look at the year-over-year improvement, what would you say are the key -- kind of in order of magnitude, what were the key attributes there? I know you have a new PBM contract. You've adjusted your pricing, your mix has changed. But if you look at the kind of menu of all those things, what were the kind of top one, 2, or 3 drivers of your MLR improvement year-over-year?

Yes, I think that the first thing I would just call out is pricing and margin expansion and being thoughtful about pricing for the risk that we were going to take, really seeing that be a significant driver and it's the most important driver in the year-over-year performance. We had a small amount of prior period development this year. In the first quarter, it was about $17 million favorable, which was really run out on 2023 claims. So that was good. And the thing I would just say with MLR, the fact that what we're seeing in MLR are trends that I'm confident are going to persist and is probably the most important takeaway we'd have from the first quarter MLR performance.

And then the PBM, how much did that help?

I'm sorry, say again?

The PBM re-contracting, how much did that help year-over-year?

Yes, in the PBM, we're not going to call out specifically the impact of that. It is embedded in the performance. Obviously, it really ultimately gets into what did you price for. We built that PBM into the pricing and we are seeing margin. And so, clearly PBM is a significant driver of our ability to price at a level and that was competitive and continued to drive market improvement.