Oscar Health, Inc. (OSCR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Bo, and I'll be your conference operator today. At this time, I would like to welcome everyone to Oscar Health's leadership transition call. [Operator Instructions] And please be advised that this call is being recorded. [Operator Instructions]. And I would now like to turn the call over to Ms. Cornelia Miller, Vice President of Corporate Development and Investor Relations. Cornelia, please go ahead.

Thank you, Bo, and good morning, everyone. We appreciate you joining us on short notice to introduce our new CEO, Mark Bertolini. Mark and Mario Schlosser, Oscar's Co-Founder and new President of Technology, will host this morning's call, which can also be accessed through our Investor Relations website at ir.hioscar.com. I note that we are not going to provide any interim updates or details around our 1Q results, which we'll announce on May 9. As such, we ask that you limit your questions to those around Mark who's joining the company. Any remarks that Oscar makes about the future constitute forward-looking statements within the meaning of the 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 year ended December 31, 2022, filed with the SEC and our other filings 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 the company may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so. With that, let me turn the call over to Mario Schlosser.

Thank you, Cornelia. Good morning, everyone. Thank you for joining us. As you saw from our release this morning, we have excellent news to share. We appointed Mark Bertolini as the new CEO of Oscar effective April 3, 2023, and I will be taking on the role of President of Technology overseeing products and engineering. I look forward to working with Mark on continuing to deliver on our business plan and objectives. In terms of where we stand in our plan for the year, this morning, we reaffirmed our full year 2023 guidance. Board and I have been fortunate over the past 1.5 years to work with Mark in his role as a strategic adviser to Oscar Health. And one thing has become very apparent over this time, Mark shares on both our [indiscernible] and then our vision of what is wrong with health care today and what it will take to fix the system. We've spent extensive time together discussing our shared perspective on the 3 biggest trends shaping health care today, increased consumerization, increased digitization and the shift towards value-based care. [indiscernible] and discussed our collective passion for putting the consumer in the decision-making seeds when it comes to health care. We share a fundamental philosophy that a critical component of changing health care is a truly innovative technology powering Oscar and the industry. More time we spent the Mark, more certain, we felt that there is no single person better suited to maximize the opportunity we have with Oscar, believes in the Oscar mission, and he has a proven track record of creating meaningful value for shareholders, employees and for members. As part of this transition, I will be turning my full attention to our platform and technology as President of technology. I'm a computer scientist by training. And in today's environment of breathtaking change in large language models, AI and the product technology space, I am energized at the prospect of focusing there. During that, as Oscar continues to grow and to scale, we continue to build the technology modes that has made us different from day one. Leading product engineering with a singular focus on building Oscar's tech platform for the future, I think I would play to my greatest strengths and continue working to push the bounds of how technology can change health care for Oscar and for the U.S. health care system overall. Mark brings something to Oscar that few others in the world possess, a proven track record of not only scaling health insurance companies, but moreover fundamentally changing how health care looks in this country. Know Mark is the former Chairman and CEO of Aetna. During his tenure here, he led the company's transition from a traditional health insurer to a consumer-oriented health care company. Part of this announcement, Josh and I recommended the cancellation of the founder's grants, manage dilution as we bring on Mark and to compensate our employees. I believe in the substantial value that Mark can bring to the organization as a new CEO and we're investors in his success. Board has been saying that we are thrilled to welcome Mark to Oscar. And unfortunately sitting right next to me here, and I will turn the call over to Mark.

Thank you, Mario, and thank you all for joining us today. It's nice to see some familiar names dialed into the call. I'm excited to join the team at Oscar at a pivotal time in the company's evolution. Team at Oscar under Mario's leadership, has built an insurance business and tech platform that is ready to deliver critical infrastructure in a quickly changing health care ecosystem. As an adviser, I've spent time with Oscar's leadership team, built an understanding of the technology platform and the business plan, all of which make me confident about our future. Simply put, I've joined Oscar because I believe in the mission of the company, and I see a genuine opportunity to create significant shareholder value along the way. As you saw in the 8-K, the compensation I agreed to with the company is aligned with our long-term incentives around value creation. And returning to the health care industry because I believe there is still work to be done. System remains fragmented and unaffordable. And there is one company, in my opinion, best positioned to fix it. Whether it's an insurance business or as a service to others, Oscar presents a unique opportunity to push the health care industry. With industry-leading engagement and an NPS of 47, Oscar has demonstrated that its technology and member experience are differentiated. I see a great foundation at Oscar to accelerate the continuing shift toward a more consumer-oriented focus for the health care industry. Looking forward, our first priority will remain delivering a profitable insurance business with positive adjusted EBITDA in 2023, positioning us to reach our overall positive adjusted EBITDA for the total company in 2024. At the same time, we will take a fresh look at our technology platform with an eye toward building out our strategy for bringing more of our capabilities to the market over time. Compared with our experience in the insurance sector, we believe our solution will offer unparalleled value. Advising the company for the past 1.5 years has given me a strong sense for our mission, strategy and culture. As a result, I expect to hit the ground running. One of the things that drew me to Oscar is the culture and values that Mario and Josh have instilled in the organization over the years. The company is truly powered by its people. I'm excited to work with this amazing team as we continue to reach new heights as an organization. I plan to dedicate the coming weeks to meeting with all of our people and our partners. I look forward to connecting with you, our investors and analysts. I also look forward to talking more with you on our first quarter call in May. With that, I'll turn the call over to the operator for questions.

[Operator Instructions] We'll take our first question this morning for Mr. Michael Ha of Morgan Stanley.

This is Connor Massari on for Michael Ha. Mark, looking back at your wealth of experience and having seen managed care evolve over the years, as you look at the current state of managed care and glimpse into the future, what opportunities in managed care excite you the most over the next 5 to 10 years? And then so much of the conversation has shifted towards value-based care that I know you're focused on the company's goal of reaching profitability right now. But once you achieve that, do you envision a world where Oscar could be willing to get back into the Medicare Advantage/value-based care game, not just as an enablement tool for MA providers and or plans via +Oscar?

Thank you for the question. I would start with how we see the market evolving. We think it will continue to get more individualized. If you look at the totality of individuals purchasing health care through Medicare and Medicaid and also through the ACA, we expect that to grow. And with the potential for individual care health HRAs, I think there's a huge opportunity to fund that program differently. And for us, as Oscar, with our 47 NPS, the ability to attract customers and bring a great customer experience to the market and have them come work with us. So first, individualization. Secondly, digital, pandemic taught us a lot about digital health care, and there is more to go. And I think people are more used to it. And so as we look at our platform and just executing against our own business model, the opportunity to create a digital platform networks all the way in from virtual care, even into tertiary care and into the health care system, allows us to build a value care model -- value-based care model that's not only for the provider relationship but also for the member relationship. They find true value in the quality of the customer experience and the care we're providing. So this whole idea of individualization, digital and value-based care are the 3 tenets upon which we're going to move forward with our strategy.

Thank you. We'll go next now to Jonathan Yong of Credit Suisse.

Mark, just as you think about stepping into the goal officially next week, how do you think about any change that you are contemplating or thinking about conducting as you step into that role? And what are your key focus points kind of in the near term and then longer term other than obviously getting the InsureCo to profitability this year?

Well, that's the first one. But secondly is getting to know the organization culture better. While I worked with Josh, Tim, Mario and members of the senior leadership team as an adviser, I need to get myself grounded in how the organization works. And so we'll be spending time on the less glamorous parts of running a business. What is the management process? How do we run the cadence? How do we make sure we're delivering on results. How do we look at the pillars of the strategy that we need to work on today so that we can deliver here 3 years from now? So all of these things are going to be part of the way I like to operate a business, which is planning connects to the management, process connects to talent. And it's an economic flywheel that we're going to generate and work here. So in the first 90 days, there's nothing to be dramatic. It's going to be about me getting grounded me instilling the kind of discipline I like to see in an organization, working with the current management process and building upon it. And then ultimately, over time, we'll consider how we're organized, what is the team and further how we evolve the strategy going forward as we look at the possibilities around the +Oscar..

Thank you. We go next now to Joshua Raskin at Nephron Research.

I got 2 questions. I guess, first, Mark, as an adviser for the company over 1.5 years. Why do you think Oscar hasn't received any strategic interest? And then second, as you look across the leadership team, what skills do you think would be additive in the future?

Well, Josh, I think Mario and Josh have had a number of conversations about strategic opportunities. And I think that strategic interest isn't where we're focused right now. We're focused on how we grow the company and how we change health care. And that's the reason I'm here. The opportunity for an organization like ours as nimble as it is to create a customer experience that people will come to is a great way to think about disrupting the industry. So we have to build that platform and how we think about it. On the people front, I don't know enough yet, Josh, about the depth of the team and where we may need some help. But we will be looking at that seriously. That's 90-day -- first 90-day kind of analysis that I need to do as we think about what do we need not only now, but as we look to the future. So more to come on that.

Thank you. We go next now to Stephen Baxter of Wells Fargo.

Mark, if I remember correctly, you were initially a big believer in the promise of the individual market when the Affordable Care Act was passed and then early on in the implementation. I was hoping you could talk a little bit more about what you think would allow Oscar to succeed if the employer market does move to more of a defined contribution or HRA model over time. Obviously, a big expansion with potential opportunity that could potentially be a much different sale in potentially a more competitive market if everyone has to focus on. I'd love to hear a little bit more about your thoughts there.

Well we have components of the platform that are already active in engaging that. So that's why our Net Promoter Score is so high. That's why our engagement is high from our membership. And so we have an aspect of our tech platform that's called the campaign builder. How do we reach [Technical Difficulty].

Mr. Bertolini, this is the operator. I believe we lost your audio, if you can test your mic.

But also the customer is leaving the people they used to do business with and going with that disruptor. Pardon?

Mr. Bertolini, you might want to repeat that, you actually cut out for most of your response. I apologize.

Medicaid business, when delivered appropriately as a great customer experience is going to bring the members to us. And so we want to focus on making that happen and making us the choice every time people have to make [Technical Difficulty].

And ladies and gentlemen, that is all the time we have for questions this morning. We'd like to thank you all for joining us today for the conference and wish you all a great remainder of your day. Goodbye.