Waterdrop Q2 2024 Earnings Call Transcript

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September 4, 2024

There are 1 speakers on the call.

Operator

morning, everyone. This is Tracy Li from WodeDrop Investor Relations. It's my pleasure to welcome everyone to WodeDrop's 2nd Quarter Tom Han 4 Earnings Conference Call. All participants are in the listen only mode in our English lines. As a reminder, today's conference call is being recorded.

Operator

Please note that the discussion today will contain forward looking statements made under the applicable provision of U. S. Private Securities and the Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Financial 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 as under applicable law. Also, this call includes discussion of certain non GAAP measures. Please refer to our earnings release for reconciliation between non GAAP and GAAP. Joining us today on the call are Mr. Shen Peng, our Founder, Chairman and CEO Mr.

Operator

Liang Wei, Director and GM of Insurance Business Mr. Xu Xiaobin, Head of Finance Department and Ms. Jasmin Li, Board Secretary. We will be happy to take some of the questions in the middle of the conference call. Hello, everyone.

Operator

This is Sheng Peng. In May 2024, we celebrated the Board of Directors' 8th anniversary. Over these years, we have continuously iterated in pace, Particularly over the past 2 years, faced with a complex and changing environment, the company has actively transformed its business. We have placed greater emphasis on delivering value, pursuing healthy operations and ensuring sustainable growth. As a technology company, amid the new wave of AI, we are actively exploring the application of large language models such as LLM in the industry to build the company's core competitiveness for the next stage.

Operator

In Q2, our business continued to advance with existing strategies achieving robust financial performance. The company's overall revenue reached a total of RMB676 1,000,000. Our net profit attributable to ordinary shareholders was nearly RMB 88,300,000, reflecting a year over year increase of over 300%. Waterdrop has maintained profitability for 10 consecutive quarters since Q1 of 20.2. This quarter, what is our consolidated leading position in the industry?

Operator

Firstly, our insurance business quality FIP reached RMB1.78 billion with an operating profit margin exceeding 21%. In April, we initiated a quality service upgrading year, offering good service, good product and good claims to users to further build our brand influence to also achieve the 1st export of customized solutions, exploring broader application of the LOM with insurers. Secondly, Horizon Medical Co funding actively participates in the multi level medical security system. Offering services in bilingual language and improving user experience, our operation efficiency improved and the segment loss was reduced continually. Thirdly, in healthcare related business, our patient recruitment platform system as cooperation was consumables.

Operator

Moreover, we achieved high quality deliverables in CRO and the digital marketing with our clients. In addition, we have committed to social responsibility and sustainable development. In June, the company won annual charity project and annual charity model as a 21 for charity gala. By the end of June, Wazak Charity platform has partnered with 112 public charity organizations and onboarded with more than 15,500 projects. This concludes the recap of our Q2 performance.

Operator

Currently, the industry is adapting to new policies, which may pose more some challenges in short term. However, we are confident in a long term benefit from high quality development and we'll actively see the industry opportunities. This year, the company remains committed to its financial guidance, targeting double digit revenue growth while maintaining robust profitability. We are grateful for on the ongoing support of our shareholders and investors and for our shareholders' interest and investor returns. The company has been actively repurchasing shares in open market for 3 consecutive years of fiscal 2021 as the announcement is over, Oyuop has cumulatively repurchased 49,300,000 ADS for over $100,000,000 Recently, our Board has approved a new share repurchase program.

Operator

Authorizing the company repurchased up to $50,000,000 within the next 12 months. The repurchased shares will be used for ease of encouraging our employees and the company to grow together. In addition to the actual repurchase in March, while relating our full year results of 2023, the company announced its first special cash dividend with Jitsin based on the strong profitability of 2.3, which was paid in Q2. Moving forward, if our business remains healthy and is within profitable, we plan to distribute dividends at least once a year to reward the support of our shareholders and investors. We are pleased to announce that we support Kobo, the company with soon launched its 2nd special cash dividend based on the first half of twenty twenty four book operating results.

Operator

The total dividend amounts to about $7,500,000 with 0.02 dollars per ordinary share and $0.02 per ADS. The shareholders of ordinary shares and ADS as a secluding date of October 12 October 11, 2024, U. S. At the same time entitled to dividends. I will now pass the runway to discuss our insurance business in Q2.

Operator

Thanks, Insoo Shen. In Q2, the insurance business generated about RMB1.78 billion in FRP, a Q on Q increase of 1.4%. Insurance related income was about RMB570 1,000,000 and as the operating profit was about RMB120 1,000,000, the operating profit margin maintained at a level of more than 21%. During this quarter, our short term insurance FIP hit RMB1.25 billion, up 8.2% quarter over quarter. New policy premiums surged near 20% sequentially.

Operator

We advanced our customer acquisition through platforms like Red Book, TikTok, WeChat, videos and so on. We were able to gain user insights and provide more accurate product recommendations via AI technology, driving the number of new users up by 15.8% through 2 0Q. We also focus on synergy and efficiency further increasing premiums from existing customers. Moreover, our short term product range has expanded with more offerings, leading diverse needs and raised average premiums by 7.7%. In April, we initiated a service upgrade year introduced to initiatives like direct claims line, claims within 24 hours and service start program to enhance customer satisfaction, maintaining a high renewal rate with a sequential increase.

Operator

For long term insurance, FIP reached RMB530 1,000,000 and the Y01 and QoQ performance was pressured by high base figures and product upon change from a few facing challenges. The company restructured its service team, phasing out low efficiency operations and expanded high yield team virtually to 1.7% rise in quarterly per capita premium. We enhanced our content metrics for life planner approach, increasing life planner premium contribution, emphasizing private domain operations for online sales. We leverage holiday promotions as to boost the user engagement resulting in a 22% increase in private domain premium. We also reached our product lineup with our disability insurance product premiums reaching RMB80 1,000,000 in Q2.

Operator

To improve user experience, we introduced an upgraded membership service, operating health management and other exclusive benefits, expanding our brand visibility. During this quarter, the company continued building its offline brokerage business, completing team upgrades and improving services. We also strengthened cooperation with insurance carriers and improved product competitiveness. On Shunlun Bao, the team consolidating its competitive and either acquisition and premium to early increased steadily. One Drop and the ShenzhenBao continue to strengthen synergy of insurance technology, explore the application of AI in the planner model and improve user acquisition efficiency.

Operator

In Q2, the company promoted innovation and customization in insurance products, including upgrade maybe in cancer protection insurance, maternal and child insurance and inclusive insurance. In terms of health insurance based on the safety side of new users, the company has in turn service upgraded its cancer insurance products, providing a combination of reimbursement and fixed payment for cancer patients and improve user ability to cope with the risks, providing users with long term protection. With series of maternal insurance, Jiahao continues to lead the industry. This product has been upgraded to version 3.0 and we have been launched as a parent child critical illness insurance and it is brand, extending coverage to meet production needs after the child's birth. In the field of insurance for pre existing conditions, our inclusive insurance, relapse insurance, chronic disease insurance and hospital based scenario insurance products have been highly praised by a large number of customers with related premium sales increasing 100,000,000.

Operator

In Q2, we continued R and D investment, pioneer LLM, application in medical, critical illness and so other insurance products. Through the end of Q2, we secured 5 and filed over 30 more patents related to LLM. Our R and D is now focused on self-service scenarios, developing a full process AI insurance consultant platform. This application can replicate human voices and accurately identify customer's intention, setting a new standard in the insurance industry. Our medical insurance service announced features in AI 2018, which has already met the average performance of human consultants in certain scenarios with operational cost of just a 10% of human consultants.

Operator

Lodging our AI technology, we have signed a strategic partnership with insurers, one of the top insurers in this quarter, making our first external empowerment of customized commercial AI consultant solution. Another LOM institution, AI co pilot, Bang Bang, is applied to multiple scenarios of our insurance business. Bang Bang can help with explanation of terms and policies, product comparison, product recommendation and revenue systems. It effectively creates efficiency and improves user experience. It has assisted more than 60% of our human consultants.

Operator

So insurance programs, 100 of 1000 times. Next, Joon will introduce the development of the company's core funding and health related business in business in Q2. Thank you, Ren Wei. As of the end of Q2, twenty twenty four, around 461,000,000 people cumulatively donated 65,100,000 to about 3,250,000 patients through our Waterdrop medical funding. In Q2, adhered to the user first service for most principle, we continue to optimize our business process and provide users with more personalized service.

Operator

For instance, in regions populated by ethnic minorities, our platform now supports bilingual fundraising, aiding in the spread of cases within local communities and bolstered by AI assistant bilingual verification to minimum growth, further enhancing our reputation and credibility. We actively participated in the construction of Bohu Hui Bang as a multilevel medical security platform. Thanks to this project and our charitable initiatives in June the company won annual charity project and annual charity model at the 2024 Charity Gala. In future, the company will continue leveraging the user insight and service capabilities bring more social value. During this quarter, our healthcare related income was RMB26,400,000, up 4.2% quarter over quarter.

Operator

We collaborated with a total of 100 and 85 Pharmaceuticals and CROs. Moreover, we initiated services for 88 new programs during Q2 with the focus on digital trends and commercial trial and the multi channel marketing solutions to serve a broader client base from this angle. Our healthcare related business has been established for over 2 years and has quickly risen to the top speed. This year, we will continue to maintain our competitive position in the industry. At the same time, we will place more emphasis on the balance between our business growth and operational efficiency, assess the investment and promote the balanced development of business.

Operator

In Q2, with its robust patient network and AI technology, the Yifan platform enrolled over 820 patients, bringing the total to over 8,600. In the partnership for an asthma trial with a leading MSC, it used targeted online media and patient community to enroll 145 patients in less than 8 months, expanding treatment options for our patients and earning a price for our clients. Moreover, a key CLL project finished enrollment in less than 4 months, surpassing client expectations. With our outstanding delivery abilities, our cooperation with both domestic and international leading pharmaceuticals has continued to expand. This quarter in cooperation with 1 of the global top 5 from Zuivo, the platform won this for 3 consecutive points of higher projects because of our good reputation.

Operator

In addition, the orders in hand continue to accumulate. We also recently reached a cooperation with a number of leading MNCs this quarter and it is expected to start cooperation in the second half of twenty twenty four. The e fund platform is committed to empower industry with student mobilization and actively participate in virus relative academic seminars. This quarter the platform joined the DCT practice case and analysis project initiated by the Chinese Society For Drug Regulation and we shared AI enabled cases in the intelligent subject to recruitment model with hundreds of expert and followers and we gain extensive recognition and trust. In terms of digital multi channel marketing business, the platform has embedded AI capabilities in multiple business names such as reporting, report interpretation, knowledge based reconstruction and patient management Q and A in the process of patient management projects with the leading MSC.

Operator

With our help, their patient return rate and the customer satisfaction has been significantly improved. Thank you for listening. I will now hand over to Xu Xiaoying to discuss our financial performance. Thank you. Dear.

Operator

Hello, everyone. I will now walk you through our financial highlights for the Q2. Before I go into detail, please be reminded that all members call this year will be RMB and please refer to our earnings release for a detailed information on our financial performance on both year over year and quarter over quarter basis, respectively. In Q2, despite industry challenges, the company's overall performance remained stable. The company achieved net operating revenue of RMB676 1,000,000, stable year over year but down 4.1 percent quarter over quarter.

Operator

The insurance related income amount to RMB574 1,000,000, down 5.4 percent sequentially. Corresponding services amounted to RMB69,300,000, up 2.9% quarter over quarter, while healthcare related income was RMB26,400,000, up 4 point 2% sequentially. Regarding operational costs and expenses, the company continued to focus on improving operational efficiency. In the Q2, the company overall operating costs and expenses were RMB624 1,000,000 representing a decrease on both Y o Y and quarter over quarter basis. Operating costs fell from RMB333 1,000,000 in the Q2 of RMB203 1,000,000 to RMB319 1,000,000 in this period.

Operator

With the increases of Tiananbaou in the scope of consolidation, operating costs improved by RMB11,500,000 in personnel costs year over year, partially offsetting the RMB12,900,000 decrease in cost of referral and service fees and RMB8,600,000 decrease in cost of patient recruitment from home team. And in the combined influence, operating costs decreased by 4.2% compared with the same period last year. On a quarter over quarter basis, operating costs decreased by 3.7 percent mainly due to a decrease in the cost of referral and service fees of RMB10 1,000,000. S and M expenses were RMB157 1,000,000 decreased by 23% year over year and 13.6% quarter over quarter. It's mainly due to the decrease in marketing expenses to 3rd party traffic channels and personal cost in this quarter.

Operator

G and A expenses were RMB94 1,000,000, decreased by 2.1% year over year, mainly due to the decrease in personal costs because of the team adjustment. On a quarter over quarter basis, it increased by 5.6%, mainly due to the combined impact of increasing allowance for software accounts and reduced professional service fees. R and D expenses were RMB53.3 million, down 38.5 percent year over year and 4.8% quarter over quarter due to the decrease in personnel costs and share based comprehensive expenses. In the Q2, the company maintained stable operations. Net profit attributable to the company's ordinary shareholders increased by 307% from RMB21.7 million in Q2 2023 to RMB88.3 million in the current period.

Operator

Operating cash inflow remained positive this quarter with net inflow of RMB50 1,000,000. Looking ahead, we will continue focusing on operational quality, optimizing financial performance and maintaining healthy business development. And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

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Key Takeaways

  • WodeDrop reported Q2 net operating revenue of RMB676.1 million and net profit of RMB88.3 million, up over 300% YoY, marking its 10th consecutive profitable quarter.
  • The insurance segment delivered RMB1.78 billion in FIP with an operating profit margin above 21%, driven by an 8.2% QoQ rise in short-term insurance FIP and a 20% sequential surge in new policy premiums.
  • WodeDrop is innovating with AI, filing over 30 patents, piloting an LLM-based insurance consultant platform and deploying its “Bang Bang” AI copilot to automate 60% of advisor tasks at 10% of human cost.
  • The company has returned capital to shareholders through share repurchases (49.3 million ADS for over $100 million) and announced a new $50 million buyback, alongside two special cash dividends totaling $7.5 million for H1 2024.
  • In healthcare, its Waterdrop Medical funding platform facilitated RMB65.1 million in donations to 3.25 million patients, while healthcare-related income rose 4.2% QoQ to RMB26.4 million, supported by CRO partnerships and patient‐enrollment innovations.
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Earnings Conference Call
Waterdrop Q2 2024
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