Yuanbao Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 27, 2025

Key Takeaways

  • Positive Sentiment: Robust Q2 results: Revenue reached RMB 1.07 billion (up 25.2% YoY, 10.3% QoQ) and net income rose 55.6% to RMB 305 million with a 28.5% margin.
  • Positive Sentiment: Cash reserves stood at RMB 3.42 billion (up 99% YoY), providing a solid liquidity buffer for strategic expansion and innovation.
  • Positive Sentiment: Operational breakthroughs included a record 7.9 million new policies issued, full Mainland China coverage, and deeper penetration into underserved markets.
  • Positive Sentiment: AI-driven initiatives: R&D investment grew 55.4% YoY, with AI R&D comprising over 10% of the workforce and LLMs and intelligent agents boosting efficiency.
  • Neutral Sentiment: Management expects 2025 revenue growth of 20–30% and profit margins above 20% despite macro uncertainties, with no 2026 guidance or shareholder return plans yet confirmed.
AI Generated. May Contain Errors.
Earnings Conference Call
Yuanbao Q2 2025
00:00 / 00:00

There are 6 speakers on the call.

Operator

Ladies and gentlemen, good day, and welcome to Yunbao Inc. Second Quarter twenty twenty five Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Stella Liu, Investor Relations and Strategy Associate Director.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Please note that today's discussion will contain forward looking statements made under the Safe Harbor provisions of The U. S. Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions, and other factors.

Speaker 1

Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion. A general discussion of the risk factors that could affect Yanbao's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update these forward looking information, except as required by law. During today's call, management will also discuss certain non GAAP financial measures. For a definition of non GAAP financial measures and the reconciliation of GAAP to non GAAP financial results, please see the earnings release issued earlier today.

Speaker 1

Joining us today on the call from Yuan Bao's senior management are Mr. Rui Fang, our Chairman and Chief Executive Officer and Mr. Rui Wang, our Chief Financial Officer. Mr. Fang will deliver his remarks in Chinese followed by an English translation.

Speaker 1

We will conclude the call with a Q and A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yuanbao's Investor Relations website. I will now turn the call over to our Chairman and CEO. Mr.

Speaker 1

Fang, please go ahead, sir. Hello, everyone. Thank you for joining our second quarter twenty twenty five earnings conference call. Last quarter, our stellar results once again demonstrated our technology driven growth momentum. In the 2025, our total revenues reached a record RMB1.07 billion, an increase of 25.2% year over year and 10.3% quarter over quarter.

Speaker 1

Net income surged 55.6% year over year to RMB305 million, with a net income margin of 28.5%, marking our twelfth consecutive quarter of profitability. As of the June, our cash reserves stood at RMB3.42 billion, providing a solid foundation for future strategic expansion and technological innovation. Our strong financial performance was underpinned by continued operational breakthrough. In the second quarter, the number of new policies issued reached a record high of 7,900,000, while our user base and market penetration continued to expand. This achievement fully validates our forward looking technology investments and highlights our sustained improvement in profitability.

Speaker 1

In terms of quality of service and protection coverage, we achieved substantial progress across three key areas expanded coverage, drove additional efficiency with technology and updated our service ecosystem. To date, Yuanba has extended coverage to all provinces in Mainland China, penetrating underserved markets with cost efficient products. Our interconnected networks of model delivers seamless support throughout the entire customer journey, deeply empowering our operations and enabling us to capture new opportunities in the inclusive insurance market. We continue to increase our R and D investments in AI technologies. As of the June, our AI R and D team represented over 10% of our total workforce, providing solid technical support for the ongoing optimization and iteration of our core engine.

Speaker 1

From a technology strategy standpoint, we have been further integrating large language model applications across our operations to reinforce our competitiveness and improve efficiency. Our approach is anchored in three key areas. First, we integrated more AgenTiC AI capabilities into our workflows to improve operational efficiency. In the second quarter, we fully integrated specialized agents across critical R and D and testing workflows, including code review, log classification, kit management, report monitoring and online anomaly detection. These agents not only significantly reduced repetitive rules based manual tasks, but also leveraged advanced automation and intelligent analysis to substantially improve coding efficiency, test coverage, and issue detection speed, while enhancing overall system stability and observability.

Speaker 1

In addition, we are accelerating the development of a unified internal agent platform. The platform features three key components: low codeno code development frameworks for rapid agent customization intelligent knowledge management tools capable of processing multi source heterogeneous data and standardized multimodal interaction interfaces. This comprehensive platform will empower our business teams to develop tailored agent applications quickly and cost effectively, accelerating enterprise wide adoption across diverse business scenarios. Second, we leverage RAC technology to empower our specialized insurance knowledge base, driving significant improvements in business accuracy. We've used a proprietary RAC system for extracting and interpreting insurance policy clauses, tackling industry wide challenges such as multiple coverage options and nested liabilities, which often leads to ambiguous retrieval results.

Speaker 1

By incorporating GraphReg technology, we achieved structured parsing and highly accurate information retrieval, which significantly improved the accuracy of our AI customer service responses. We also extended our REST technology to enterprise level knowledge management, building a company wide knowledge management platform to unify the parsing and structured storage of a massive volume of internal unstructured documents, including contracts, financial policies, customer service guidelines, and business regulations. This creates a reusable enterprise level intelligent knowledge base. With this foundation, our legal teams can efficiently retrieve historical contracts and relevant clauses using natural language search. And functional departments can respond rapidly to employee inquiries, dramatically improving knowledge accessibility and operational intelligence across the company.

Speaker 1

Third, we are reshaping the service experience through multi product applications. We have independently developed a voice emotion recognition model powered by the transformer architecture with over 80,000,000 parameters, featuring advanced acoustic feature extraction and emotion generalization capabilities. The model conducts deep analysis of speech signals and temporal patterns to accurately detect complex user emotions, such as happiness, joy, urgency, and distress. The recognition results instantly trigger context appropriate responses, either by adjusting AI driven dialogue flows or alerting human agents to provide tailored communication approaches and processes, significantly elevating service quality and user satisfaction. We have also developed a proprietary Smart Voice Engine that combines multimodal deep neural networks with advanced TTS technology.

Speaker 1

Using only short voice examples, it generates natural personalized, synthetic voices with adjustable tone, speed, and emotional expressions by integrating prosody control and adaptive voice modulation algorithms. This allows it to flexibly adapt to diverse user preferences and service scenarios. This scalable technology has greatly improved user satisfaction and reinforced YuanBao's leadership in delivering intelligent human like services for inclusive insurance. Before we wrap up, I'd like to highlight our proactive role in driving industry advancement. In May, we jointly released the 2024 China Online Insurance Consumer Insights Report with the Research Center for China Insurance and Pension Finance at Tsinghua University PBC School of Finance marking our fourth consecutive year of this publication.

Speaker 1

The report provides an in-depth analysis of online insurance consumers' pain points, and purchasing behaviors, offering actionable insights and guidance at the consumer demand level to advance high quality development and navigate transformation in the online insurance sector. It also further strengthens Weimbach's leadership and professional influence within the industry. Looking ahead, the implementation plan for high quality development of inclusive finance in the banking and insurance sector issued by the National Regulatory Authorities has identified the development of an inclusive insurance system as a core five year objective, which aligns perfectly with Weimbach's strategic focus over the past five years. Bridging on favorable policy momentum and the industry's steady growth trajectory, we will accelerate the development of an integrated insurance, technology and services ecosystem. This includes advancing AI driven innovation and end to end AI applications, expanding strategic collaborations with insurance carriers and increasing our penetration in broader markets to efficiently reach target consumer groups.

Speaker 1

By proactively addressing the evolving demand for high quality inclusive insurance, We are committed to creating long term sustainable value for consumers, partners and shareholders. Now, I will turn the call over to our CFO, Rui Wang, to present our financial results. Thank you, everyone.

Speaker 2

Thank you, Mr. Fang. Thank you all for joining today's earnings conference call. I'm pleased to walk you through another quarter of strong financial performance marked by double digit growth in both revenue and profitability, enhanced operational efficiency and a strengthened cash position. Starting with our top line results, total revenues for the second quarter reached RMB10.07 billion, representing a robust 25.2% year over year increase and a 10.3% quarter over quarter increase.

Speaker 2

This performance was primarily driven by continued momentum across our insurance distribution and system services revenue business. Reagan is down further. Insurance distribution services revenues grew to RMB 350,600,000.0, up by 29.6 year on year, fueled by an increasing number of policy transacted on our platform, supported by our enhanced targeted marketing efforts. System services revenues reached RMB 718,200,000.0, a 23.8% increase compared with the same period last year, driven by ongoing improvements to our AI integrated full consumer service cycle engine, which enhanced our marketing and precise analytics services and strengthened our system service offerings for both new and existing insurance carriers. Moving to expenses.

Speaker 2

Total operating expenses increased by 16% year over year to RMB772.2 million. Operational support expenses came in at RMB40.9 million, remaining stable compared with the same period last year. Selling and marketing expenses rose by 14.1% year over year to RMB602.1 million as we ramp up our marketing efforts to attract new consumers and retain existing ones. General and admin expenses increased by 6.2% year over year to RMB 47,500,000.0, primarily due to higher personnel costs, including salary, bonus and benefits. R and D expenses increased by 55.4% year over year to RMB 81,700,000.0, reflecting our intensified research and development efforts and the expansion of our R and D team to reinforce our leadership position as a technology driven online insurance distributor.

Speaker 2

As a result of this strong top line growth and disciplined cost management, our profitability improved significantly. Net income jumped by 55.6 year over year to RMB 304,700,000.0, with the net income margin expanding to 28.5% compared to 22.9% in the same period last year. Non GAAP adjusted net income rose by 57.8 to RMB 325,200,000.0, representing a non GAAP net income margin of 30.4%, up from 24.1%. We also maintained strong cash flow and a healthy cash position. This quarter, we generated RMB453.2 million in operating cash flow, ending the quarter with total liquidity of RMB3.42 billion, representing a 99% year over year increase and a 23.6% increase quarter over quarter.

Speaker 2

In summary, our second quarter performance builds on a strong momentum from the first quarter, establishing a clear growth trajectory for the second half of this year. With our robust financial foundation and substantial liquidity reserves, we are strategically positioned to capitalize on emerging opportunities while advancing our long term strategic priorities. Thank you. And I would like to open the call to Q and A. Operator, please go ahead.

Operator

Thank you. We will now begin the question and answer session. We will now take our first question from the line of Thomas Wong from Goldman Sachs. Please go ahead, Thomas.

Speaker 3

Congrats on the results. And there are just three areas. So firstly, think some operating metrics, can you sort of briefly explain how the commission rate, take rate and also premium per policy, how is that changing? And secondly, just if we don't see any macro stimulus policy in the second half of this year, how do we see that potentially impact our growth outlook? And thirdly, given that there's ample cash on the balance sheet, how does company think about shareholder return policies such as dividend and buyback?

Speaker 3

Thank you.

Speaker 2

Yes. Thank you, Thomas. This is Ray Wan. I'll take the Q and A session. So in terms of metrics, we don't disclose commission rate on a quarterly basis, but our commission rate historically for second quarter has remained relatively stable.

Speaker 2

For take rate, it can be roughly estimated by dividing revenue by premiums. The take rate was around 10% from second quarter going forward. We expect that rate to remain at that level. Now looking at the full year picture, we still expect most of our metrics remain stable. But to emphasize, what we focus on is really to optimize continue to optimize our ROI to make sure that as we acquire new consumers and customers, we can always maintain a very healthy level of ROI, which translates to a healthy level of growth and profitability.

Speaker 2

Your question on premium per policy, our average short term premium policy remained relatively constant with historical levels, tracking normal range within the year and quarter over quarter. Now we do see a slight decrease on premium per policy, mainly because of two reasons. One, we have been adjusting our marketing approach in real time and different approaches lead to different outcomes such as shift in age profile, spending power and consumption habits. For example, if you go to a lower age group, your typical premium per policy is slightly lower. At the same time, there is a change in product mix.

Speaker 2

Our short term critical illness policies typically have slightly lower premiums per policy compared to short term medical insurance. And slightly increased proportion of critical illness product in Q2 contributed in a very marginal decrease overall. Your second question on potential impact of weaker macro backdrop in the second half. And while the economic trajectory for the second quarter remains uncertain, our platform is always positioned to demonstrate resilience through operating a high growth short term health insurance sector, which remains significantly underpenetrated in China with substantial long term growth potential. Secondly, our proprietary and powerful engine that continuously enhances its predictive accuracy at every stage.

Speaker 2

We'll continue to ensure that as we acquire new customers, our ROI remains at above one. And even considering potential macroeconomic variability in the 2025, we are closely monitoring several key industry trends. Number one, customer acquisition costs could lower, which would benefit us in terms of acquisition. We could see a gradual shift towards more value oriented insurance product as consumers become more price sensitive that might lead to modest adjustments in the average premium. And historically, such environments have tended to accelerate market share consolidation towards players with established scale advantage and efficient consumer acquisition cost management.

Speaker 2

Now your last question on our current cash balance and how we think about shareholder return in the future. Now we haven't explicitly said that we will do anything going forward, for us, we continue to evaluate the best strategies providing the best shareholder return through various operational and capital markets opportunity and dividends is certainly the question you asked is certainly one of them. And obviously, when we have more, we will certainly disclose to the market.

Speaker 1

All right. Thank you.

Operator

Our next question comes from the line of Amy Chen from Citi. Please ask your question, Amy.

Speaker 4

Hi, management. Thank you for giving me the opportunity to ask questions. I have three questions. The first one on business outlook. Appreciate your insights on the resilience of your business model despite macro uncertainties.

Speaker 4

I'm wondering if you could provide some guidance on revenue growth as well as earnings growth for the full year of 2025 as well as 2026. The second question is about compliance. We saw news recently that some health insurers were being fined for automated renewals that were implemented on their website when selling online health insurance policies. As a broker, how what kind of measures did Yuenbao adopt to avoid such scenarios and to avoid customer complaints? And the third question is on revenue mix.

Speaker 4

We noted that in the second quarter, distribution services actually booked relatively faster year on year growth compared to system services. What's driving this growth? And how should we think about revenue mix going forward? Thank you.

Speaker 2

Thank you, Amy. So your first question on guidance for revenue earnings for this year and next. So we haven't given explicit guidance for 2026. For 2025, We maintain that we're always balancing growth and profitability. We expect full year revenues continue to grow at least 20% to 30% year on year and profit margin to remain at least above 20.

Speaker 2

Your second question on potential insurers being fine for automatic renewals. Now currently, we're not we have not been affected by the incident that you mentioned. We always provide consumers with clear policy term explanations and demonstration during policy signing so our customers can choose their preferred auto renewal settings during the insurance sign up process. Regarding regulatory compliance, we remain effective communication with regulators and establish comprehensive governance documents, including marketing conduct policies complemented by mandatory compliance review processes to standardize business practices. So all of our insurance products are developed with partner insurers and every policy term and renewal process is approved by regulators.

Speaker 2

Your last question on the difference in growth rates of the two business segments. So the revenue recognition methodology differs between these two, insurance distribution service and system services revenue. System services revenue is recognized as a one time event, while commissioning comes from insurance distribution services, follows an amortization model. So as we see system service demonstrate the value we deliver to insurers, including our customer acquisition capability, technological expertise and AI driven engine. So there's mainly a timing difference in terms of difference in growth rate, but also the difference in how we recognize these revenue items also affect on a quarterly basis the growth rates.

Speaker 2

If we smooth out or look in a longer period, we're probably going to see more smooth trajectory.

Operator

Right. Thank you. We will now take our next question from the line of Tao Chen of CICC. Please go ahead, Tao.

Speaker 5

Hi, thank you for having me. And I want to I would like to ask three questions. First, against the backdrop of ongoing sales care payment reforms in China. So I would first like to ask what potential opportunities these reforms present to them about and how the company is bearing at the product level. And secondly, regarding the West spread application of AI, I am curious, I want to ask about the specific areas where AI is currently supporting the company's operations and what financial benefits or impacts has been realized.

Speaker 5

And finally, based on the release documents I would like to understand the key reasons or key drivers behind noticeable difference between the company's premium growth and revenue growth in the second quarter. Thank you.

Speaker 2

Thank you, Shingtao. The first question on the medical payment method reform. So under the payment reform for healthcare insurance, the utilization of innovative medicines may be constrained due to lost cost control measures. So in response, the National Healthcare Security Administration introduced commercial health insurance innovative medicine list aiming to address the unmet demand for high value innovative medicines not covered by basic insurance through commercial health insurance channels. So the introduction of this policy will effectively address the value perception issue in commercial insurance for consumers.

Speaker 2

So we do think that's a very beneficial trend showcasing that the regulators are clearly supportive of commercial insurance. Now by enabling access to premium medications beyond the National Medical Insurance Coverage List, it can help boost conversion rates. So overall, against the backdrop of Medicare payment method reform, the commercial health insurance innovative medicine catalog establishes new reimbursement channels for innovative medicine through policy deregulation and expanded payment coverage while simultaneously creating incremental market opportunities for players like us that sell primarily commercial health insurance. Number two, a question on AI. So as you know, entire engine or our business is run on our AI engine, which leverages gradient boosting machine and an approach that progressively optimizes through multiple decision trees.

Speaker 2

So we have 4,800 or 4,900 models that's already existent in our engine. This makes it particularly effective for highly complex multi stage decision processes with strong structured data patterns. So we've created a deep integrated modeling system where multiple models simultaneously run AB test across several feature data warehouses. So that's the underlying engine of our business. So as you can see, the reason we're able to maintain profitability for the last twelve quarters is because we have been continuously optimizing our core engine.

Speaker 2

Number two, while AI powers our core infrastructure, we've also invested heavily in advancing operationalizing large language model capabilities. So as you heard from Mr. Fong, we enhance operational efficiency through key decision dimensions, agents or GenTeC AI, RAC systems and multimodal systems. For example, leveraging RAC technology, we built an LLM service framework integrated with a proprietary insurance knowledge base. So when users inquire about insurance related topics or products, these RAC systems enable the model to retrieve and reference relevant content from our database, significantly improving query resolution accuracy.

Speaker 2

We haven't provided explicit quantitative measures in terms of how large language model application has improved our overall business efficiency, but we may do so in the future. Now in terms of our current engine, the efficiency can be simply viewed through our existing financial performance. Now your last question on the year on year growth rate of policies premium versus difference in revenue growth rate. Now in Q2, we achieved business growth with expanded revenue scale and increased number of new policies. Our insurance distribution services earned commercial fees as a percentage of premiums paid by insurance policy holders based on terms specified.

Speaker 2

And insurance policy holders generally pay premium monthly during the policy term. Now due to amortization deferral effect, the recognized revenue growth rate appears slower than a number of new policies or premiums because policies and premiums are recognized at 100% where distribution service revenues as amortized. That's really again like the previous question, a timing difference. Now in Q2, both our premium per policy and take rate experienced very slightly decline as previously addressed in the second question. The fluctuation in premium per policy primarily stems from a flexible adjustment in marketing strategy and increased proportion of critical illness policy to optimize our ROI and our growth and profitability.

Operator

Thank you. Our next question comes from the line of Yue Xu from China Securities. Please ask your question, Yue.

Speaker 2

Hi, management. Thanks for taking my question. My first question is about unit economics. How do we think about ROI as you scale up your business going forward? And the second question is about how the management team think about the set of course by major tech platforms like Alibaba or Tencent?

Speaker 2

And lastly, my question is about the international expansion. Could you share your thoughts about the future roadmap? Like, are you considering expanding your product portfolio into new insurance categories or everywhere outside China? Yep. So thank you, Vieshu.

Speaker 2

Our engine plays a crucial role in expanding our scale and achieving profitability. Now our ROI has remained positive for over ten quarters and mainly due to our engine. So the system calculates real time return rates across different service paths for every consumer that we acquire at every stage. So identifying optimal solutions to maintain our current ROI above one is arguably our most important metric. Going forward, as we continue to scale, we still believe that this market is still highly underpenetrated and we see a continued path of a very healthy growth and very healthy profitability going forward, which as you can translate into a very healthy ROI.

Speaker 2

Now, if large platforms incumbent tries to adopt our model and to this market, we do think it will be very helpful for the overall industry because right now if the industry is still growing very, very quickly, more entrants coming in will provide more consumer guidance and support and awareness of lack of commercial insurance coverage to the industry. However, as we have seen for the past few years, major players are already competing in this market just through different business models. So we do think increased competition may be helpful for the entire industry. Now in terms of who we are competing with, because we are advertising primarily on fee based systems online, we're not only competing with existing distributors but also other advertisers that compete for user time across these platforms, including e commerce players, game advertisers, etcetera. Your last question on international expansion to replicate this model overseas.

Speaker 2

So our Hong Kong office officially opened in July. With this expansion, we're building a key platform to tap into new markets and create fresh opportunities down the road. In August, we successfully acquired an insurance brokerage license in Hong Kong. Moving forward, we will continue to explore different businesses and actively seek a second and third growth curve. But as of now, we don't have additional information to share.

Speaker 2

But obviously, we'll share more details as specific plans and scale take shape. Thank you.

Operator

Thank you all for your questions. And that concludes the question and answer session. I'd now like to turn the conference back to Ms. Stella Liu for any additional or closing comments.

Speaker 1

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. We're presenting financial communications. Our contact information for IR in both China and The U. S.

Speaker 1

Can be found in today's press release. Have a great day.

Operator

Thank you for your participation in today's conference. This does conclude the program.

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