Waterdrop Q4 2023 Earnings Call Transcript

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Provided by Quartr
March 26, 2024

There are 1 speakers on the call.

Operator

Good morning, everyone. This is Tracy Li from Woundra Platinum Master Relations. I would like to welcome everyone to Woundra 4th quarter and fiscal year conference 3 earnings conference call. All participants are in a listen only mode in our English line. As a reminder, today's conference call is being recorded.

Operator

Please note that this discussion today will contain forward looking statements made in the Safe Harbor provisions of the U. S. Private Securities and the Litigation Reform Act of 19.5. Forward looking statements are subject to risks and uncertainties and the company's actual results differ materially from our current expectations. Certain new risks and uncertainties include, but not limited to, those outlined in our public filings with the SEC.

Operator

The company does not undertake any obligation to update any forward looking statements, except as required in the applicable law. Also, this call includes discussion of certain non GAAP measures. Please refer to our earnings release or a combination between non GAAP and GAAP. Joining us today on the call are Mr. Sheng Hung, our Founder, Chairman and CEO Mr.

Operator

Yan Zhang, Co Founder, Director, SVP and GM of International Business Mr. Zhu Zetao, GM of Mazzo's Quotomi and Pharma Tech Business, Mr. Li Jue Ru's Board Secretary. And I will be happy to take some of the questions in the remaining line at the end of the conference call. Hello, everyone.

Operator

This is Sheng Tong. Let's talk about our industry development first. Looking back on 2023, thanks to the virus economy's stimulus policy, the Chinese economy shows a gradually stable and recovery trend. Despite that, the regulation of the personal insurance industry remains cautious as it is continuing to evolve towards high quality development. So as we saw both trends and opportunities, we firmly believe that with the clear guidance and gradual implementation of new regulation policies, the health, innovation capabilities and sustainability of the industry will improve further in the future.

Operator

Market participants with brand and technological advantages are more likely to stand out. As such, we will build up new quality productivities with improved technologies and innovative business models, leading our industry to its transformation and upgrading. We are still with confidence about this. In terms of financial performance, in Q4 of 2023, the company continues to uphold its entrepreneurial spirit and pursue healthy business development, which was adopted by stable and resilient financial results. Total revenue reached about RMB659 1,000,000.

Operator

Since Q1 of 2020, we have continuously recorded stable profitability for every quarter. In the Q4, the bottom line performance further improved with GAAP net profit attributable to the company reaching about $59,100,000 representing 61 percent Q on Q growth. For fiscal year 20.3, the GAAP net profit attributed to the company is about RMB 167 1,000,000. In the meantime, we saw consistent cash inflow from operations, building up our cash balance. As of the end of 2023, the cash, cash equivalents and short term investments totaled about RMB3.39 billion, an 8% increase from last quarter.

Operator

Our annual cash reserves strengthened our foundation for carrying out steady business development plans, moving us in our long term growth initiatives and enabling us to embrace industry change with confidence and technology competitiveness. From a business perspective, in Q4, all business segments maintained stable and healthy development, continuously solidifying our leading position in the industry. For Wodizawa Insurance, we are in place despite a difficult industry situation. We actively developed the new products and models with our insight into the diversity across virus and networkies and then continuously generate steady profits. For WalletHub Medical Group Funding, we remain committed to our principle of user first service promote, continuously participating in development of a multi level medical support system, we consistently improved its transparency and operational efficiency.

Operator

Loss in the segment was reduced compared to last quarter. For Yifan platform, we continuously enhanced its service capability through business upgrades. In Q4, the number of hiring clients increased significantly, making good growth in our cooperation with both domestic and foreign considerable companies. For the full year, this segment recorded year over year revenue growth of nearly 70%. For R and D, as a technology driven company, we maintained substantial investment in R and D and applied for more than 10 AI large language model, AOM, patents.

Operator

In the 4th quarter, our stock development LLM overdraft ratio completed engineering task upgrades and expanded its application into multiple cases, which brought efficiency improvements throughout the entire insurance services. Now I will touch upon our Charity and EFC initiatives. Waterdrop actively incorporate EFC principles into various effects of our operations, environmental protection, talent development and community investment, tightly integrated ESP value with our corporate DNA. The latest ESD rating results in the Chinese leading ESD institution in Turkey shows that our ESD rating have recently been upgraded to a winning score among players in insurance sector. So Oui Dog Charity platform remains dominant with our CSR.

Operator

We joined the halfway bound multilevel medical support information system, which has effectively connect business matter to security, critical unit assurance, medical assistant and charity in the Thailand service. Upon its launch in August 2023, it has assisted the government in establishing a group provincial level medical support platform. By year end, nearly a thousand patients have applied for assistance on this platform. This project was honored with the NUCSR case award hosted by PIKU Studio Alliance. In December 23, in response to a Dansu earthquake, Oda's activities conference and emergency team and launched 14 fundraising projects to assist the disaster of back areas and rebuilding damaged homes.

Operator

And I would also like to update everyone with our actions taken in the capital market. Regarding the share buyback, as of the end of February 2024, the company has cumulatively repurchased about 39,700,000 ADS on the open market at a total nearly $88,800,000 which affirms our confidence in our business value and its long term prospects. Furthermore, the repurchase shares will be used for ESOPs to motivate our talented employees. Moreover, ODDO continues to uphold our commitment to our shareholders. Our Board of Directors has approved a special cash dividend plan to total about $15,000,000 with $0.04 per ADS.

Operator

On the healthy financial performance of the company and its commitment to shareholder value, The company is pleased to initiate its 1st dividend program and it was pleased to continue to bring return value to shareholders in the future. This is a recap of our development in Q4. We are confident in our business outlook as well as that of industry. Looking into 2024, our strategies are for insurance marketplace business, we are here to use the first at Core's principle, committing to providing the best service to existing users. Meanwhile, we will develop more customized better useful money that is for money insurance product through technological innovation to target various standards working.

Operator

For our microfounding, we will continuously take advantage of our Gaoyuan technological capabilities to ensure sustainable development while fulfilling CSR and meeting user needs. For Yifan platform, we will continue to leveraging water drops to this data advantage as we explore innovative service models, rapidly increase network penetration, establish service capabilities covering multiple device categories and create a new wealth engine for long term growth. With abundant cash reserves, the company will continue to seek cooperation and investment opportunities around insurance and the healthcare sectors. As for technology, we will accelerate technological environment by enhancing our AI capability and build core technological nodes to support a long term development based on nearly 8 years of the business accumulation. Our self developed LOM water dock ratio has significantly improved internal efficiency and we will further empower the industry partners sooner.

Operator

Now I will pass to Randall to discuss our insurance marketplace business. In the Q1, the growth of personal insurance premiums in the industry experience slowed down. Against this backdrop, we focus efforts on user value creation and long term development and continuously optimize operations for existing users. Meanwhile, we actively explore new product offering and models, expanding customer acquisition channels, leading the foundation for advanced high quality business development. In the 4th quarter, FYP reached RMB1.53 billion, insurance related income reached RMB588 1,000,000 and operating profit reached RMB128 1,000,000.

Operator

For the full year of 2023, the FYP reached RMB7.11 billion. Insurance related income reached RMB2.34 billion and operating profit reached RMB528 1,000,000. In the 4th quarter, FRT of short term insurance products reached over RMB990 1,000,000. During this quarter, the company strengthened platform operational management for users, enhancing policy service and optimizing user engagement, resulting in increased customer certification satisfaction. The number of users grew steadily with number of policies per user running for 2 quarters in a row and the renewal rate for short term insurance remained at a level of 95%.

Operator

We were acquiring users from content production, enhancing the quality and the product choice on video channels. As a result, video playback for Yireo increased by 60 8.6% tier 2 leading to a 34.5% sequential increase in premium. As we further diverse our product offerings, the FIP of long term insurance policy reached YMB 530,000,000 in the quarter, an increase of 22.9 percent YOY. Among the loss insurance premiums increased 116.2 percent YOY. During this quarter, we improved the in writing quality for long term insurance users, spent in partnership with insurance companies to launch more customized products.

Operator

Following the removal of high interest products in the Q3, we saw both opportunities and challenges in our industry. In terms of online brokerage channels, we emphasize on the integrated capability of our product portfolio, ensuring a better user experience. At the same time, we cooperate with high quality sub media channels to grow a high quality user base. On offline brokerage front, we lost the World of JP-one hundred programs in this quarter. Offline brokerage prioritized its resources to better serve those high net worth customers.

Operator

This initiative in cooperation with industry partners aims to build a one stop platform in capacity insurance, pension planning and wealth succession as well as the entire team of high quality workers. During the Q4, we expect to pick the top performance agents from Yixin. The number of active agents increased by 108% yoy and productivity per capita of long term insurance products rose by 8% yoy. In the Q4, WalletHub Insurance market play enhanced our synergies with Chenanbao. While Chenranbao continues to maintain independent operations, the 2 teams deepen the cooperation on various effects, including R and D, content marketing and product offerings.

Operator

Chen An Bao contributed the FIP of RMB102 1,000,000 in the 1st quarter. The policy quality remains at the industry leading level with the renewal rate remaining above 90%. In the Q4, we continued to deepening its innovative capabilities across health insurance and fee insurance. Regarding health insurance, we launched a to address the needs of from broader user base. Among this, the Tiananbao health insurance essentially covers all groups with chronic disease, critical illnesses and minor alignment.

Operator

Through our intelligence and driving stability, users with existing commissions can also buy insurance online reliable products. On top of regular health insurance plans, we also launched a product called Yi Sheng Sheng Hu. This product is the 1st online long term credit union insurance plan that covers users with pre existing conditions. Moreover, we developed service and products to attract the needs of each demographic groups. We launched Wodera's Jiahao Yu, the industry's 1st maternal and infant insurance designed to cover the entire pregnancy circle.

Operator

Upon its debut, its product has been widely recognized by users. In terms of saving insurance products, we launched a monthly payment life insurance product, different from the traditional annual payment or not found payment products in market, the monthly payment plan is more flexible for users with lower throughput. This is an important practice for us to serving diversified savings across different market segments. Next, let me brief you about our development of AI. We apply our insurance focused large memory model, Trishou is named after our commitment to safeguard users' health with AI technology.

Operator

Currently Trishou already covers multiple scenarios in the industry business, including consulting, support moving professional service such as answering environmental questions, consulting on insurance policy terms, answering and writing questions and post insurance service. We can also be dealing about the 2 major applications, the AI insurance component and the distributed system. Both of them are based on the future life model. The AI insurance consultant acts as a smart agent that is equipped with large model technology. In digital, it competently communicates with customers in real time.

Operator

It can recommend insurance policy, a product tailored to the customer's specific needs, giving us a vast amount of insurance knowledge to better understand user needs. It has been internal task and used in medical insurance scenarios. In this context, the AI insurance component can carry a human dialogue for up to 40 minutes, undertaking 90% of work for an average human broker. The second application, the super assistant, can do an intelligent co pilot system for ADN's human agent. For example, based on the competition between ADN and the users, it displays a real time inspection of tips for insurance related questions, recommending more simple products for each user in real time, explains this in a way that is easier for users and improve ensuring the service efficiency while increasing customer satisfaction.

Operator

Currently, Bang Bang, the assistant has been initially launched at Weizhou. In the development process of Fishel, we have obtained 3 talents and accumulating more than 10 talents related to the loss model. In the future, we will continue to adhere the path of technology and talent in the industry, bringing high quality insurance service to millions. This concludes my briefing on insurance business. So let me hand over to Guzheng Cao for an update on our medical Pro Funding and Digital Clinical Trial Solutions business.

Operator

Thank you, Rianwei. As of Q4 2023, accumulated total of 450,000,000 people donated more than 62 point 6,000,000,000 to over 3,100,000 patients. So, for the drug medical performed in platform, both the and above users and the operating amount continues to grow. In Q4, our platform established the Sparkling Plan, which provides safety receptions and instructions for extremely poor people. Moreover, our offline consulting team has tried offering additional supportive service to hospitalized patients.

Operator

In the Q4, the platform further sequenced to quarantine and recruitment platform advisors from public to participate in business rule discussion and fund reviews. Platform supervisors can randomly check the cost details of any fundraising transaction and supervise the entire fundraising process. By continuing to value transparency, we keep optimizing the service experience. To make critical units assessment more accurate and efficient, we have continuously participate in the establishment of our multilevel medical support system actively responding to the amendment of charity law in China. In Q4, the amended version of PRC, charity law has passed incorporating individual assistance into its provisions.

Operator

Furthermore, on December 21, our Haoibang Mori Labo Medical support system project has awarded the Ending CSR cases award hosted by people's data online. In the Q1, the InFine platform, our digital clinical trial solution business maintained steady and healthy investment. Revenue was about RMB 20.8 million. For the full year, revenue was RMB 100 million with an increase of 69 percent year over year. In Q4, the Yifan platform collaborate was 167 from simple companies and CRO.

Operator

We made great progress on partnering with more leading MNCs. During this quarter, we successfully joined the supply list of 2 of the top 5 global NDCs and formally kicked off projects with Wainesham and more projects are expected to officially launch in 2024. Additionally, the Yifan platform signed a cooperation agreement with one of the top 3 global CFRs and officially initiated patient recruitment. In Q4, the platform signed a 2 new project. With the rapid development of innovative drug R and D for chronic diseases in China, the eFam plus platform continues to improve our ability accordingly.

Operator

Through efficient view of operation and capabilities and AI driven matching, we enrolled in a record number of patients and projects. Our project covers categories including dermatology, respiratory, cardiovascular, immunology, digest disease and so on. In terms of CRO's disease, leveraging the experience operation, we successfully secured a concept high project in the rare disease field of cell therapy, providing more colors with comprehensive digital service, such as data insights, medical affairs, product management, clinical supervision, patient recruitment and mathematics statistics and so on. Regarding patient service, the platform continues to take into cooperation with the leading global MMC in the patient health management of cognitive disease. By integrating technologies such as U.

Operator

S. Models, it significantly enhanced patient service experience and efficiency, gaining high recognition from customers. We also signed contracts with multiple leading domestic and MMCs for medical patient operation, patient education and data insights, continuously expanding the number of end service scope of cooperation clients. And we continue to strive for technological empowerment. For patient private domain operation scenarios, we integrated AICC technology into our platform, intelligently identifying keywords and interaction intention from the conversation with users, allowing medical assistants to generate simple, quick and reliable judgment.

Operator

But such applications greatly improve the service quality compared to traditional methods. Thanks for listening. I will now hand over to Yang Guang to discuss our financial performance. Thank you, Zitao. Good morning, everyone.

Operator

I will now take a look through on our financial highlights for the Q4. Before I go into details, please be reminded that all members of this year will be RMB and please refer to our earnings release for detailed information on our financial results on both year on year and quarter on quarter basis, respectively. For the Q4, I mean, complicated environment or commitment to pursuing steady and healthy development, net operating revenue decreased by 3% while on white about RMB659 1,000,000. The full year net operating revenue reached about RMB2.63 billion. Among that, insurance related income amounts to about RMB2.34 billion, representing a decrease of RMB8.5 percent YOY.

Operator

Corresponding service fees amounted to RMB 162,000,000, representing an increase of 4.4% YOY. Digital comps of high tuition income amounted to RMB100 1,000,000, representing an increase of nearly 70% YY. About the operating costs and expenses, on YOY basis, since the last quarter we consolidated the financial results of Tianbao, For full year, the operating costs and expenses increased by 13.5 percent yy to RMB 2.64 billion. For the full year, operating costs and expenses increased by 4Q4, it increased by 4.3% y o y to RMB 633,000,000. On a quarter on quarter basis, the operating cost and expenses decreased by 8.1% as we adjusted our spending pace to adapt to change in the external environment.

Operator

For Q4, operating costs were about RMB 202,000,000 increased by 6 by 8.5 percent year on year and decreased by 3.2% in Q2. The sequential decrease primarily due to a decrease of 5 $800,000 in cost of refill and therapy and secondly, a decrease of $2,300,000 in the cost of patient recruitment per BOE and T. For Q4, S and M expense has increased by 26.9 percent y o y to RMB 175 1,000,000,000. The increase was primarily due to pursuing the consolidation option on Baoyao, which generated F and M expenses of RMB39 1,000,000 dollars and secondly, an increase of $15,800,000 on third party traffic channel fees, partially offset by a decrease of $21,100,000 in personal costs and share based comprehensive incentives. On Q2 basis, it decreased by 6.9%, primarily due to a decrease of $11,300,000 in self and marketing, personal costs and share based compensation expenses.

Operator

G and A expenses were $96,000,000 a decrease of 19.1% 16.3% YY and Q on Q. The decrease was mainly about personal cost and share based comprehensive expenses and the professional service fees. R and D expenses was RMB59.8 million, a decrease of 16.6 percent Y o Y and 19.1 percent Q o Q respectively. The decrease was mainly about personal cost and the share based comprehensive expenses too. For Q4, net profit attributed to the company's ordinary shareholders was RMB59,100,000 while adjusted net profit attributable to the company's ordinary shareholders was RMB74,700,000 For Q1 2022, the company has achieved from Q1 twenty twenty two, the company has achieved GAAP net profit for 8 consecutive quarters.

Operator

At full year end 2023, cash, cash equivalents and short term above and cash reserve position us well to focus on long term development priorities. To better reward shareholders and book investors' confidence, our Board of Directors has approved a special tax dividend total approximately $15,000,000 with $0.04 per ordinary shares and $0.04 per ADS. The shareholders of ordinary shares and ADS as of the closing date of April 19, 20.4, U. S. At same time are entitled to the business.

Operator

In summary, we made our financial guidance to market as we will achieve the profitability in each quarter of 2023. Like 2024, we will continue to create shareholder value with healthy growth and profit. And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

Operator

The conference has now concluded. We thank you for attending

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Key Takeaways

  • In Q4 2023 the company delivered total revenue of RMB 659.1 million and GAAP net profit of RMB 59.1 million (up 61% QoQ), bringing full-year GAAP net profit to RMB 167.1 million and marking eight consecutive profitable quarters since Q1 2020.
  • Operating cash flows remained robust, with cash, cash equivalents and short-term investments rising 8% QoQ to RMB 3.39 billion by year-end, bolstering the company’s balance sheet for long-term growth initiatives.
  • All business segments sustained healthy growth: the insurance marketplace optimized user engagement, the Yifan platform posted nearly 70% YoY revenue growth, and R&D efforts yielded over 10 AI large language model patents and new LLM-driven efficiency upgrades.
  • Management repurchased 39.7 million ADS for approximately $88.8 million to fund ESOPs and announced a special cash dividend of $15 million (or $0.04 per ADS), marking the company’s first dividend program to enhance shareholder returns.
  • Looking to 2024, the company will prioritize a “user-first” insurance marketplace, launch tailored insurance products, drive microfunding sustainability, accelerate AI technology integration, and pursue strategic partnerships in insurance and healthcare sectors.
AI Generated. May Contain Errors.
Earnings Conference Call
Waterdrop Q4 2023
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