Waterdrop Q1 2025 Earnings Call Transcript

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June 5, 2025
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Moderator

Good morning, everyone. This is Tracy Li from Investor Relations. It's my pleasure to welcome everyone to Waterdrop's First Quarter twenty twenty five Earnings Conference Call. All participants are in listen only mode in our English line. As a reminder, today's conference call is being recorded.

Moderator

Please note that discussion today will contain forward looking statements made under the cover provision of U. I. Private Securities and the Litigation Reform Act of 1995. Forward looking statements are subject to risks and uncertainties that could 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.

Moderator

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. Joining us today on the call are Mr. Shen Hong, our Founder, Chairman and CEO Mr. Yan Wei, Director and GM of Insurance Business Mr. Xu Xia Ying, Head of Finance Department and Mr. Justin Li, Board Secretary. We will be happy to take some of the questions in the major line at the end of the conference call. Good afternoon, everyone.

Moderator

This is Shun Tong. In the first quarter, Photoshop achieved robust business growth while maintaining a steady profitability. Our revenue reached over million up by 7% year over year with net profit attributable to the company's ordinary shareholders about million, a significant 34.2% year over year growth. This marks our thirteenth consecutive quarters of GAAP profitability. By segment, our insurance business continues for active growth strategies driving first year premiums up by 19% year over year contributing to an 8% year over year increase in insurance revenue.

Moderator

For medical performing as a pioneer of online service platform for individuals seeking financial health was strictly adhered to regulatory guidelines to be nearly assisting 3,470,000 patients. Yifan platform maintained stable execution with over 11,000 patients enrolled today. We further advanced our AI capabilities establishing in the two benchmarks for insurance applications. R and D expenses in Q1 totaled $6,000,000 up by 3.6% as part of the quarter. Our water drop Guardian AI insurance efforts expanded across more scenarios, including internal use in maternity insurance, BCom and external partnership.

Moderator

Region two shareholders remain our priority. By May 2025, we have repurchased approximately 54,200,000.0 ADS in the open market, totaling $1,070,000 This May, we distributed our third cash dividend of $7,300,000 Wooden Rail remains committed to social responsibility and sustainable development, actively creating shared value for society. As of 03/31/2025, Photoshop Charity Platform has partnered with 117 public charitable organizations, launching over 15,500 projects, including rapid response to the effect of the week. Currently, we expect our revenue growth rate in subsequent further increase, we anticipate that the annual revenue will grow by over 20% year over year. In the second half of the year, the company intended to increase its investment in driving business growth, which may have a certain negative impact on the annual profit.

Moderator

I will now turn to Ran Lei to update our performance in insurances. Thank you, Shun Tong. In the first quarter, our insurance business achieved FIP of approximately RMB2.09 billion with a year over year growth of 19.3% and a quarter over quarter growth of 10.2%. Insurance related revenue reached about million, increasing by 8.4% year over year and by 13% quarter over quarter. The insurance business generated operating profit of approximately million with an operating profit margin of 23%.

Moderator

FRP for short term insurance reached RMB1.5 billion with 30.1% year over year growth and 4.6% quarter on quarter growth. On the customer acquisition side, centered on water drop insurance branding, we implemented personalized marketing strategies across traffic platforms, including TikTok, WeChat channels and Xiaoongshu, while leveraging real time API capability. Currently, we exclude upgraded coverage and value aided services for existing users, driving premium growth from both new and existing customer bases. On the supply side, we have continued to innovate in median medical insurance, insurance for substandard risk and maternity insurance offering. During the quarter, our products for substandard risk generated premium of million representing year over year growth exceeding 200%.

Moderator

We have further strengthened our cooperation with insurance companies to develop more customized innovation products. Our exclusive insurance products helping SMEs being upgraded to version five point zero, Introducing coverage for multiple diseases and for the first time incorporating medication subsidy sites, providing expecting mothers with enhanced benefits. In late April, in partnership with issuers, we launched the Changbao, the industry's first medium medical insurance product with both health declaration waivers and guaranteed renewal. This product is available for chronic disease patients and individuals with suboptimal health, allowing the renewal up to age 105 and setting new standards for medical insurance coverage. FYP for long term insurance reached CNY590 million, representing a 1.6% year over year decline with a 27.6% quarter over quarter increase.

Moderator

The year over year decrease was primarily attributable to the pressure on life insurance product. However, we observed a significant growth in disability insurance and critical illness insurance. Disability insurance products contributed over $7,000,000 in premium. Within critical illness insurance, our digital health care offering, continuing to gain user recognition in this launch with multiple upgrades and integration. During this quarter, we also introduced an upgraded version of Tangbao Law, a specific insurance product for Type two diabetes patients as well as the industry first family plan long term care insurance, furthering one of our innovation in a long term health insurance product.

Moderator

The traditional online self team maintains steady quarter to quarter growth in the workforce side with productivity per capita achieving both year on year and a sequential increase. Xuendao continued to refine its online life planner model independently contributing RMB110 million in premium in one. The platform also strengthened its technology collaboration with Vodafone insurance platform, launching an AI service application currently in beta testing, which can now handling over 130 service cases. We're continuing to drive the development of large library model capability. As of the end of Q1, the company has filed 51 patents relating to our own technology And applications continue to enhance operational efficiency across all business segments.

Moderator

The AI service quality co pilot has improved quality management efficiency by leveraging LLM reasoning capability in unit operation efficiency by 83%. The AI insurance expert have made significant progress across multiple credit lines like the AI insurance expert in medical insurance is gradually scaling its capacity, facilitating $2,000,000 in monthly premiums in outbounding narrows. Additionally, WeCom service extended this quarter with the significant launch of maternity insurance service for Wicom clients in March, achieving end to end policy underwriting and premium generation. In customer service, our AI powered support system upgraded 20 fourseven, resulting 52% of users in clearance automatically. In the same scenario, it's already under 94% of the service in the class without human intervention.

Moderator

Beyond medical insurance and customer service, we are actively expanding the AI insurance experts' application to new scenarios through ongoing R and D efforts. This concludes our business insurance business in Q1. I will now pass to our Board Secretary, Jeffiney, to update our performance, medical performing and healthcare. Thank you, Ramleigh. As of the March 2025, around four seventy five million people cumulatively donated billion to about 3,470,000 patients through our Weizhou Medical Profound in Stockholm.

Moderator

We focus on three key categories this quarter. First, we optimized our process design by introducing online flash requirements at campaign initiation stage. Through this point, Flash will clearly communicate communicate the platform's orientation to users. Additionally, we have carefully educated users about our social supervision, as well as relevant laws and regulations, much like the health declaration in insurance application. This matter established an integrity safeguard.

Moderator

Additionally, Huizhong continued to enhance its risk control verification stability through systematic infrastructure improvements this quarter. We delivered standardized verification deadline for three high risk scenarios, housing, vehicle ownership and income. By integrating official verification channels like from traffic management bureaus and local government service platforms covering 92% of the cities nationwide, we significantly improved the efficiency and quality of risk verification. Regarding the most concerning issue of bond security, Autodraft implemented an intelligence monitoring platform combining system of civilians and manual follow-up, provide high risk scenarios where the system can generate optimal risk control solution based on algorithm models. Determining the ideal frequency and timing for human invention, the technological approach has effectively reduced the risk of fraud misappropriation and ensured the safety of those funds.

Moderator

In quarter, Bodhua's healthcare related business maintained steady development. The digital clinical trial solutions business partnered with 185 pharmaceutical companies secured 77 new projects. During this quarter, eight twenty two patients have been enrolled and the cumulative number of enrolled patients in response reached eleven thousand two hundred and fifteen. Revenue from digital clinical trial business grew by 11.5% year over year. The platform continues to gain the oncology view, expanding its collaborative project this quarter in thoracic graft, capturing intestinal tumors, thereby strengthening its industry competitiveness.

Moderator

Additionally, leveraging extensive patient database and digital recruitment strategy, the platform achieves multiple workflow in chronic and rare diseases, earning well recognized recognition. Currently, during this quarter, the platform has actively expanded digital omni channel marketing initiative, leveraging its algorithm modeling strength, Woduob partnered with a medical device company to jointly develop an intelligent service system for diabetes. This product is expected to be launched in the second quarter, collaborating with our partners to enhance the efficiency of patient health management. Now I will hand over to Xiaoying, our Head of Finance Department to discuss our financial performance in this quarter. Thank you, Jasmine.

Moderator

Hello, everyone. I will now walk you through our financial highlights for the first quarter of twenty nineteen. Before I go into details, please be reminded that all members for this year will be on mute, and please refer to our earnings release for detailed information on our financial performance on both the year over year and auto owned car races respectively. In the first quarter of twenty twenty five, all business second quarter of the reverse consolidated performance. The revenue reached $754,000,000 representing a 7% year over year increase.

Moderator

By business segment, insurance related income contributed approximately RMB658 million in revenue, up by 8.4% year over year. Pro form a service fee amounted to $67,100,000 remaining stable year over year. Digital clinical trial solution system generated about $22,000,000 in revenue, growing by 11.5% year over year. In terms of the operation, the company focused on enhancing efficiency and quality. In first quarter, total operating costs and expenses amounted to approximately million representing a year over year increase of about 3%.

Moderator

The growth rate was lower than the revenue growth rate. Among this, operating costs for this quarter reached RMB374 million, an increase of 13% on Y o Y basis. This was primarily due to about RMB37.7 million raise in cost of referral service fees during this period, along with more than RMB2.8 million increase in core digital community acquired version in 2019. Sales and marketing expenses amounted to RMB172 million, decreasing by approximately RMB9.6 million. Reduction was primarily reflected in also working in service fees and related operational costs.

Moderator

Through the progressive application of AI capability, internal operational efficiency continue to improve with a decrease of RMB5.9 million and RMB5.6 million respectively in this area this quarter. Moderately in fact investment in our customer acquisition led to year over year point 5,000,000 increase in marketing expenses for certain channels. Under this combined effect, sales and marketing expenses for the period decreased by 5.4% year over year. General and administrative expenses were million, down 15.8% year over year, primarily attributable to improvements in the company's management efficiency and a reduction in the professional services. R and D expenses were approximately million remaining stable year over year.

Moderator

However, the structure of R and D costs have further adjusted to focus more on building the activities. In the first quarter, the company achieved its net profit attributable to the ordinary shareholders of million, representing significant year over year growth of 34.2%. As of the end of Q1 twenty twenty five, the company maintained ample cash reserves of about $54,000,000,000 with operating cash flow continues to be positive. This quarter, the company generated net operating cash inflow of 94,500,000.0 providing sufficient financial support for future business growth. In summary, the strong first quarter performance demonstrates what is our sustainable and stable traffic growth with notable progress across multiple business segments.

Moderator

Moving forward, we will adhere to the business path of driving growth and improving efficiency through technological empowerment and continue to deliver steady performance. And ladies and gentlemen, with that we will conclude today's conference call. We do thank you for joining. Have a good time.

Analysts
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Key Takeaways

  • Revenue and profit growth: In Q1, revenue reached $754M, up 7% YoY, and net profit grew 34.2% YoY, marking the 13th consecutive quarter of GAAP profitability.
  • Insurance business momentum: First-year premiums rose 19.3% YoY to RMB2.09 B with a 23% operating profit margin, driven by new products like Changbao medical insurance and substandard risk offerings with >200% growth.
  • AI and R&D acceleration: R&D spend rose 3.6% to $6 M as the company filed 51 patents and deployed AI tools that improved unit operation efficiency by 83% and automated 52% of customer service interactions.
  • Capital return initiatives: The company repurchased 54.2 M ADS ($1.07 M) and paid a $7.3 M cash dividend, underscoring its commitment to shareholder returns.
  • Guidance for 2025: Waterdrop expects over 20% annual revenue growth, but warned that increased investments in the second half may have a negative impact on profit.
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Earnings Conference Call
Waterdrop Q1 2025
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