Oscar Health, Inc. Q4 FY2024 earnings call

Key Points

• 2024 was Oscar's strongest year with record high membership, bottom line profitability, and product innovation. Adjusted EBITDA grew to $199 million, net income to $25 million. Revenue grew 57% to $9.2 billion. Medical loss ratio was 81.7%, SG&A ratio improved to 19.1%.
• Key business highlights: Large ACA carrier, individual market grew 13% year-over-year, outpaced market by 37%, served 1.8 million members as of Feb 1, 2025. Strong positions in key states, growth in ICRA membership, high value products, leading NPS. Technology platform driving efficiency with AI applications. Welcomed Janet Liang as President of Oscar Insurance.
• Scott Blackley discussed fourth quarter revenue up 67% to ~$2.4B, full year revenue up 57% to $9.2B. Capital position strong with $4B cash and investments. 2025 guidance includes revenue $11.2B-$11.3B, MLR 80.7%-81.7%, SG&A 17.6%-18.1%, earnings from operations $225M-$275M, adjusted EBITDA ~$140M higher, positive net income.

No specific breakdown of product segments' financial performance and revenue contribution % provided in the transcript.

2025 Guidance

• Total revenues expected in range of $11.2 billion to $11.3 billion.
• Medical loss ratio expected in range of 80.7% to 81.7%, a 50 basis point year-over-year improvement at mid-point.
• SG&A expense ratio expected in range of 17.6% to 18.1%, ~125 basis points year-over-year improvement at mid-point.
• Earnings from operations expected in range of $225 million to $275 million, representing a significant $193 million improvement year-over-year at mid-point. Adjusted EBITDA roughly $140 million higher than earnings from operations. Positive net income expected.
• Outlook reflects lower year-over-year SEP member additions due to Medicaid redeterminations complete, and MLR seasonality with first quarter lowest and fourth quarter highest as members meet deductibles.

Risks

• Payment integrity issues related to file to reconcile process: CMS and IRS processes affecting subsidy eligibility and premium payments. Members not completing file to reconcile may lose subsidy and not be included in paid counts. Oscar has built this risk into 2025 revenue guidance.

Q: Stephen Baxter asked about payment integrity and effectuation rates, asking for detailed discussion on assumptions.

A: Mark Bertolini and Scott Blackley discussed effectuated membership vs paying customers, with 1.8 million members paying as of Feb 1, 2025, and built risks from file to reconcile process into guidance.

Q: Josh Raskin asked about MLR increase and change to earnings from operations.

A: Mark Bertolini said utilization was slightly better, risk transfer payable drove MLR increase. Scott Blackley clarified earnings from operations guide implies adjusted EBITDA guide around $415 million at top end.

Q: Michael Ha asked about clarification on earnings guidance and membership.

A: Scott Blackley clarified top end of earnings from operations guide leads to ~$415 million adjusted EBITDA, and membership is expected to be roughly flat with built-in risk from payment integrity.

Q: Jonathan Yong asked about 1.8 million paid members and SG&A trajectory.

A: Scott Blackley said SG&A has continued opportunity for improvement with AI initiatives, and membership is pegged at 1.8 million.

Q: Jessica Tassan asked about prior period development and pricing strategy.

A: Scott Blackley provided prior period development numbers, and Mark Bertolini discussed zero premium plans as different purchasing decisions.

Q: Adam Ron asked about SG&A drivers and new hire Janet Liang.

A: Scott Blackley discussed SG&A driven by variable efficiencies, fixed cost leverage, and AI initiatives. Mark Bertolini noted Janet Liang brings skills from Kaiser to evaluate value-based contracts.