Waterdrop Q3 2024 Earnings Call Transcript

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December 11, 2024

There are 1 speakers on the call.

Operator

Everyone, this is Tracy Li from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's 3rd Quarter 2024 Earnings Conference Call. All participants are in a listen only mode in our English line. As a reminder, today's conference is being recorded. Please note that this discussion today will contain forward looking statements made under the Safe Harbor provisions of White Private Securities and the Litigation Reform Act of 1795.

Operator

Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but not limited to, those outlined in our public filings with the SEC. The company does not undertake any obligation to update any forward looking statements, except as required under applicable law. Also, this call includes discussion of certain non GAAP measures. Please refer to our earnings release for a reconciliation between non GAAP and GAAP.

Operator

Joining us today on the call are Mr. Sheng Kong, our Founder, Chairman and CEO Mr. Yuan Wei, Director and GM of the Insurance Business Mrs. Xixiao Yin, Head of the Finance Department and Mrs. Stephanie Li, Board Secretary.

Operator

We will be happy to take some of your questions in the Mandarin line at the end of the conference call. Hello, everyone. This is Sheng Peng. In Q3, the company remains committed to healthy operations and sustainable growth, delivering solid results. Total revenue for this quarter reached RMB704 1,000,000 and net profit attributable to ordinary shareholders was around RMB92.8 million, reflecting a year over year increase of over 150%.

Operator

For the 9 months of 2024, the company reported total revenue of RMB2.08 billion, up 5.8 percent year on year end. And net profit attributable to ordinary shareholders of RMB260 1,000,000, 142 percent increase compared to last year. This Q1 of 22, we have achieved profitability for 11 consecutive quarters. In Q3, each of our business segments focused on enhancing user value with key metrics showing steady growth. In insurance business, we targeted seniors, mothers and individuals with previous innovations, expanding our network of insurers and launched several innovative products.

Operator

1st year premiums totaled over RMB2 1,000,000,000, a significant increase year on year with operating profit margin about 20%. In medical funding, we actively responded to new charity law and the merits for administration as online service platform for individuals seeking financial help. Both user numbers and corresponding amounts continue to rise, while the segment loss was further narrowed, reinforcing the sustainability of our operations. In the healthcare sector, our strong execution capabilities allow us to expand our network with pharmaceuticals with the number of enrolled patients growing both year on year and quarter over quarter. We are also delighted to report notable progress in AI.

Operator

As a tech company rooted in insurance and healthcare, Autograph is on the forefront of integrating large language models into our industry. Following 2 years of focused development, we launched AI Top Sales Platform 3.0, a conversational AI platform that customized AI sales agents for businesses, features advanced AI capabilities of outbound calling and conversational interaction, capable of supporting the voice based sales and customer service across virus B2C industry and helping our ecosystem partners enhance service quality and efficiency. Following our collaboration with P&C Insurers in Q2, the AI Topdell 3.0 platform reached a new milestone in commercialization this quarter. We expanded our partnership with more insurers and have initiated pilots with companies in non insurance sectors, including e commerce and education, where there is a high demand for large scale customer service team. As of now, we have established collaboration intentions with 10 clients across various industries with 8 already in the testing phase.

Operator

This highlights a vast market potential for our self agent solution. Going forward, we will continue investing in R and D to build our next core competitive advantage around AI applications. We value trust from our investors and prioritize shareholder returns. At the end of November 2024, the company has cumulatively repurchased approximately 50,900,000 ADS from the open market, totaled around US102 million dollars Moreover, we recently completed our 2nd special cash dividend of approximately US7.3 million dollars For corporate social responsibility, as of the end of September, the Waterdrop Charity platform has partnered with 115 public charitable organizations and launched over 15,000 charity projects. During this quarter, we published our 203 ESD report and so co authored the ESD whitepaper for the online insurance industry.

Operator

With the CUAC Green Finance Institute offering valuable insight into the industry ESD practice. Recently, the company received several prestigious awards, including the China ESD Connected Pioneer Award and China ESD Excellence Award, reflecting our commitment to ESD and our strong progress in this area. This concludes our update on business performance in Q3. Looking ahead, Oui Drag will continue to leverage technology focusing on long term high quality and sustainable growth centers around user needs. As AI continues to transform more industries, our AI capabilities and its 1st mover advantage in the launch category models position us for greater opportunities and growth in the future.

Operator

I will now pass to Ganwei to discuss our insurance business in Q3. Thanks, Mr. Shen. In Q3, the insurance business generated about RMB2.04 billion in FIP, up 20.4% Y o Y and 14.8% quarter over quarter. Insurance related income was about RMB600 1,000,000, representing a decrease of 3% YOY and increase of 4.7% quarter over quarter.

Operator

Operating profit was around RMB120 1,000,000, but operating profit margin was maintained at about 20%. During this quarter, our short term insurance FIC hit RMB1.37 billion, up 30.3% YOY and 9.9% quarter on quarter. The increase in premiums on new policies primarily drives the growth. The company reached out to new customers through multiple channels and methods, creating product IPs on platforms like Lirasburg, TikTok and Wixom Video, collaborating with influencers and further optimizing customer acquisition efficiency based on our RTA model, the number of new users in Q3 remain stable on quarter on quarter basis. Stating existing users, the company is committed to improving user experience and iterating its insurance product offering according to the different user profile, leading to an increase in premium sequentially.

Operator

For example, regarding inclusive insurance products, the company has launched several products that do not require half disclosure, have a 0 deductible and effective pre existing addition, thereby lowering our user barriers. Some products have added a special medical checkup service to enhance user protection. In Q3, the FIP upgrade of the acquisition insurance was nearly RMB200 1,000,000. In terms of maternity insurance, the 3.0 version of Xiaoying continues to gain user recognition and the parent child critical illness insurance has been successfully launched. Due to this combined effect, the average premiums for short term medical insurance has increased 14.9% sequentially in Q3.

Operator

In September, we held a Waterdrop Insurance Service Ecosystem Conference, where we strategically partnered with several insurers, seamless insurers to establish the triple group service alliance, aiming to enhance the entire user experience. The FIP for long term insurance in this quarter reached RMB607 1,000,000, a year on year increase of 4.3% and a quarter on quarter increase of 26.4%. The online sales team have been stepping in their gain stepping off their gain, boosting efficiency and driving increase of premiums per capita sequentially. The last final model, which is content driven, has been a major player in the growth spurt, especially with the riding trend of annual payment products. On the supply side, we have been catering to the needs of senior strengthen ties with insurance companies and broaden the scope and protection of our disability insurance offering.

Operator

We rolled out new addition of our disability income loss insurance, which covers people from 19.70 and extended coverage up to 90. This quarter, disability insurance brought in around RMB78 1,000,000. Plus, together with our insurance partners, we have built an exclusive Lucky Star critical illness policy that covers 10 common brand conditions, gaining comprehensive protection against green and health risks. On the service side, we continue to build up over the upper premium class membership system, covering over 30 benefits for our members, offering health in management, medical express success and the high end customized service such as wealth management, children educational planning and emergency assistance for both long term and short term insurance units, leading to an increase of renewal rate in the long term products. Shunnam Bao Insurance sector has also showed strong growth interest rate, contributing RMB260,000,000 in FOP with significant increase in both year on year and quarter on quarter.

Operator

During the quarter, Xunlangbao further strengthened its left planning planner team, leading to a further rise in premium per capita. In Q3, Wojtong Insurance Marketplace and Chunranbao continued to deepen the collaboration in product and research development, leveraging the Wojtong Guardian LOM to enhance content generation and customer service scenarios for China. In terms of offline brokerage, Woyuzu has announced a brand upgrade. NTU used a comprehensive service system that integrates insurance, healthcare and legacy planning. Its initiatives encompasses a range of service, including expanding product offerings, innovating service system and business mid platform service, all designed to empower brokers in their condition.

Operator

As for technology, the company continues to invest in insurance large language model. As of the end of September, the company has applied for over 40 patents related to LOM with 6 patents granted. Firstly, to date, the knowledge base of our One Drop Guardian has covered over 7,000 mainstream insurance products. Since the beginning of this year, the company has developed several intelligence products based on this. Secondly, the quality inspection process has been revolutionized with due to our AI service quality agents, which have efficiently replaced the previous menu sampling assets.

Operator

By implying the AI preliminary check followed by human review, we have significantly boosted inspection efficiency, achieving full coverage in certain scenarios. And it processed orders at a pace that's 3.7 times faster than the conversional method, tangibly increasing our operational effectiveness. Thirdly, in the service scenario, what we have brought in has developed the conversational skills that had human interaction in insurance products. During this quarter, our AI agents further enhanced its technology capabilities integrating the long term memory remodel and improving handling the low quality response in daily conversations and addressing a long term issue. This is a summary of this quarter's insurance product performance.

Operator

Next, Jasmine will introduce the development of our company's core funding and health related business in Q3. Thanks, Mr. Yuan. At the end of Q3, 204, around 466,000,000 people cumulatively donated RMB66.3 billion to about RMB3.32 million patients through our when we have medical funding. This quarter marks significantly milestone for our medical funding business and the industry as a whole.

Operator

Following the issuance of the merits for administration of online service platform for individuals seeking health released by Ministry of Civil Affairs of PRC and other government departments on September 5, 2024. This matters outlines specific regulations on fee structures, fund management and the 5 against illegal activities, establishing a legal framework and enhancing operational guidance and transparency in the core funding industry. We understand that the credibility is less blood of our platform. This quarter, we have been continually refining our risk control strategy to enhance transparency. For instance, by iterating our public supervised supervision mechanism, we ensure that verification and handling of the reported cases are clearly and properly communicated on the same page, bolstering a transparent and efficient oversight environment in cooperation with the public.

Operator

At the same time, as a technology company, Weidrop is continuing exploring how technology can empower the platform. For example, our programming system employs algorithms to deliver one of the popular for high risk cases. The platform is equipped to recognize the response to high risk situation in real time. Given outsiders with regular working hours like from 1 to 6 am, by taking immediately emergency measures such as pausing cross funding cases and suspending payments, ensuring swift content of any risky cases. At Woodshop, we firmly believe in the positive power of technology.

Operator

In future, we will continue to protect every act of counties as well as technologies, innovations and improve the risk control mechanism. And for healthcare related business, this quarter our health related business maintained steady growth. For digital clinical trial solution business, our platform enrolled 909 new patients in Q3, adding to the cumulative total of over 9,500 since ever launched, showing a consistent growth trajectory. Building on excellent fulfillment and efficiency and quality, Yifan's platform continued to expand and deepen its partnerships with the Yifan's platform continued to expand and deepen its partnerships with leading pharmaceuticals both domestically and internationally. In Q3, we collaborated with a total of 184 pharmaceuticals and CROs.

Operator

During this quarter, the platform played key roles as a primary partner and even on exclusive recruitment partner in several projects. For instance, in a clinical trial for rare oncology targets as exclusive recruitment partner for the top MNC, we leverage precise analyst and the intelligence matching of patients' medical records to help pharmaceuticals existing their enrollment target. As the industry moves towards high quality growth, top pharmaceuticals are embracing AI and big data in new drug development. Yifan platform with its digital expertise has been sharing insights in with leading domestic and international pharmaceuticals, earning broad recognition. This has spurred the ongoing collaboration in new therapeutic areas.

Operator

In Q3 alone, we signed 88 new projects. In digital mobile channel marketing business, the platform has further integrated AI technology into various patient service stages. For example, in patient education in the period, our AI assessments quickly addressed the questions delivering professional medical device and system service efficiency. For quality control, AI is managed attack deployments, many checks are holding service standard and the professionalism. Plus, using structured medical data and the watch memory models, we guide patients in follow-up, enhancing their disease management awareness and compliance.

Operator

Looking ahead, the platform will continue to collaborate with industry partners to explore for the applications and possibilities of AI technology in pharmaceuticals narrow, supporting the industry's digital transformation. Thanks for listening. I will now hand over to Xu Xiaoying to discuss our financial performance. Thank you, Dew. Hello, everyone.

Operator

I will now just review our financial highlights for the Q3. Before I go into details, please be reminded that all members present here will be on RMB and please refer to our earnings release for detailed information on our financial performance on both the year on year and quarter on quarter basis respectively. In Q3, the company continued to optimize financial performance with notable growth in profitability. Our total revenue for this quarter was RMB704 1,000,000, showing a moderate quarter on quarter growth of 4.1%. Breaking it down by business segment, the insurance business contributed approximately RMB600 1,000,000 in revenue.

Operator

A quarter on quarter increase of 4.7%. The corresponding segment generated service fees of around RMB65.8 million, a quarter on quarter decrease of about 5%. Digital Clinical Trio Pharmaceuticals generated revenue of RMB24.3 million, a quarter on quarter increase of 17.4%. Regarding operating costs and expenses, our operating costs amounted to RMB341 1,000,000, up 6.7% compared to the previous quarter, mainly due to a rise of RMB32.6 million referral and service fees, partially offset by the reduction of personnel costs. Sales and marketing expenses were RMB173 1,000,000, a 10% quarter on quarter increase driven by a strategy increase in advertising efforts based on the accurate and efficient operation, leading to a higher marketing expenses to 3rd party travel channels.

Operator

General and administrative expenses were RMB119 1,000,000, an increase of RMB17 1,000,000 from the previous products, primarily due to the impairment loss of intangible assets related to the acquisition of Shunabox. R and D expenses were RMB53 1,000,000 remaining stable compared to the previous quarter. In Q3, the company's profitability improved significantly year on year with net profit attributable to ordinary shareholders reaching RMB92.8 million, 2.5 times the Q3 last year and a healthy quarter over quarter growth of 5.1%. The operating profit margin for the insurance business remained consistently strong at over 20%. With sustainable net profit, we continue to maintain positive operating cash inflow, ensuring abundant cash reserves.

Operator

As of September 30, 2024, the company had cash position totaled about RMB3.44 billion, supporting the company's flexibility and stability in shareholder returns and the strategy of deployment. In summary, the strong performance in Q3 highlights order drop resilience was facing the navigating market change. Looking ahead, we will continue to uphold our business philosophy and strategy with choice, driving the company healthy growth. And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining.

Operator

Have a good time.

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Earnings Conference Call
Waterdrop Q3 2024
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