Waterdrop (WDH) Q1 2026 earnings call transcript

Good morning, everyone. This is Tracy Lee from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's first quarter 206 earnings conference call. All parties today are in listen-only mode in our English line. As a reminder, today's conference call is being recorded. Please note that discussion today will come from forward-looking statements made in the safe harbor provision of the U. S. Private Securities and Litigation Reform Act of 1995. Forward-looking statements are subject to risk and insurgentness that may cause actual results to differ materially from our current expectations. Potential risks and insurgentness include but not limited to those online in our public findings findings with the FDC. The company does not undertake any obligation to update any forward-looking statement except as required and applicable law.

Also, this call includes discussion of certain net debt matters. Please refer to our earnings release for reconciliation between net debt and debt. Joining us today on the call are Mr. Shen Peng, our founder, chairman, and CEO, Mr. Yuan Wei, Director and GM of Insurance Business, Ms. Xu Xiaying, Head of Finance Department, and Ms. Li Jielu, Board Secretary.

We will take questions in the minute line at the end of the conference call. Now, let's invite our CEO, Shen Peng, to start.

Dear investors and investors, thank you for joining Waterdrop' first quarter 206 earnings conference call. In the first quarter, we continued our last year's growth momentum, with total revenue of 1.24 billion yuan, up 64.8% year-over-year, and net profit attributable to ordinary shareholders of more than 98 million yuan. Since the first quarter of 2022, we have maintained gas profitability for 17 consecutive quarters. By segment, our insurance business continues its user acquisition strategy with insurance-related income at 74.1% a year. As this capability has been validated, we sharpen our focus on user experience while continuing to optimize our traffic channels and user targeting efficiency. The Cropani distance agreement stable, having raised medical funds for accumulated 3.75 million patients by the end of the Q1.

And our digital clinical trial solution business is the standard enrollment growth, with more than 16,500 patients enrolled to date. On technology front, we are accelerating our shift toward an AI-native company. As of March 31, 2006, we had filed 75 LN-related patent applications, including nine international ones, and were recently granted two more national invention patents in intelligence, semantic understanding, and the multimodal recognition. This technology will be progressively applied to the insurance scenario such as intelligent customer service and claims, improving service quality and efficiency.

On capital returns, we continue to share our growth with our shareholders. In early May, we completed our cash dividend since our IPO, totaling approximately $10.8 million. Our share repurchase program also continued steadily. By the end of May 2006, we had repurchased approximately $61.8 million ADS in open market for about $120 million. As of the end of May 2006, cumulative cash dividends and share repurchases since IPO has totaled approximately $170 million. dollars. Meanwhile, we remain committed to giving back to society at the end of the Q1 the Water Rock Charity Platform had partnered with 119 public charitable organizations and launched over 15,500 charity programs.

Looking ahead, we aim to seize industry opportunities and to make growth our top priority this year. Building on our proven user targeting capabilities, we will increase marketing investment further For 2016 we are targeting approximately 40 top growth with operating profit scale is expected to remain broadly stable We expect this current investment to allow greater profit potential in the coming years.

And the user-based extension will further support the company's long-term development. And that covers our overall performance in Q1. Next, I will walk through each of our business segments in detail.

Hello, everyone. This is Gamble A. Let me walk you through the progress of our insurance business. In the first quarter, insurance-related income reached $1.15 billion at 74.1% year-over-year, with operating profit of $150 million. The operating margin of Q1 is 13.3%. The year-over-year top-line growth mainly reflects the continuation of our last year user acquisition strategy. In the first quarter, we continued to set up public domain user targeting and increase our investment in traffic and AI, serving significant premium growth.

And on a quarter-over-quarter basis, while the income declined, our insurance operating margin rose by 2 percentage points. This was mainly because we proactively cut some lower OI channels during this quarter. At the same time, we are actively expanding into other high-quality traffic channels while running our mature ones with refined operations, enhancing our traffic infrastructure, and optimizing our model to drive a continuing improvement in OI. On the supply side, we are committed to giving users more diverse product offerings, which continue to earn user recognition. During this quarter, FIP from our pre-existing position, products rose 24.3% in the year. And the disability insurance products contributed $89 million in FIP. At the product level, we continue to iterate.

For example, we upgraded our inclusive cancer worry-free medical insurance series, expanding the coverage for all of the hospital prescriptions and related medical devices, as well as a range of advanced cancer therapists. We also recently launched the Shouhu Lu-Chu-Focused Cancer-Specified Disease product with a singular health discloser and a lower-the-bar to lifelong cancer protection.

On the survey side, we took multiple steps to improve the customer experience. We launched a dedicated customer complaint hotline to make it easier for users to raise concerns, and we also connected payment channels with our customer service system, expanding frontline operations, and enable faster refund processing. And for elderly customers, we simplify procedures for the children acting on their behalf and introduce a faster track service channel.

Together, this initiative upgraded our access service capability. We also continue to apply our LRM capabilities and AI tools to streamline the workflow and improve operating efficiency. The user-facing AI applications contributed approximately $87 million in incremental premiums into one, 17.7% sequentially. Through real-time support on our mini-programs, WeChat, phone calls, and WeCom, including our AI Pro insurance and AI medical insurance experts, WeCom AI, and other tools.

Our frontline consultants Tuoyi had handled more than 10 underwriting inquiries to date In late March we began internal data testing of the Cloud Co on CRM and Wecon bringing together our product knowledge base the CRE. AI, and the other two agents tools so our consultants can get instant answers on products in writing and other common questions with that's a switching between the systems and documents. Cloud Co-Pilot also supports the self-lead review, top-track replay, and refinement, and performance analytics.

In after-south service, our AI user service agent now in regular operation supports more than one million service interaction per month. And the AI service quality co-pilot continues to deliver efficiency of more than twice in a manual-only basis this baseline.

On the AI infrastructure side, our local platform, water. ca. ai now offers more than 30 purpose-built agents, each tailored to a specific scenario for our internal team and external clients in all the user-facing work.

So, that concludes our insurance business update for the first quarter. Thank you, Randa. This is Kirgu, and now I will walk you through our first quarter performance on our perfonning and healthcare business. As of the end of March 2006, approximately 494 million people had cumulatively donated a total of 73.5 billion to 3.75 million patients through the WaterDrop Medical perfonning platform. This quarter, we pursued two priorities for one job medical profonding, the AI capability viewing and better service in linguistic diverse regions.

For AI reviews, we completed quarterly upgrades involving towards an AI-assisted model without compromising risk of control quality. Our risk model can structure the content material quickly and apply the preset rules for preliminary screening, short-term intake, and first-class review and create our risk specialist for complex cases.

Secondly, we improve the service for patients in linguistically diverse communities, including areas where a minority language is widely spoken. This quarter, we systematically refine our service workflow and adapted the review standard to their real needs. We added the minority language thresholds to work alongside our existing campaign consultants on upfront consultation and the document guidance and the dispute resolution and reducing the communication costs by language barriers. In addition, we set up a dedicated service team in which the translator and the risk control specialist can track each case end-to-end and promptly resolve the Botan Act, ensuring a strict risk control compliance while respecting local culture sensitivities.

Turning to our healthcare business, we sustained high-quality growth with our product LLN application across the core business scenarios. We partnered with 243 pharmaceutical companies and zero, and initiated services for 128 new programs. Our e-bank platform single-quarter patient enrollment rose to 16% year-over-year. And the newly signed product in this quarter increased 53%, reflecting the wider partnership coverage and the deeper client engagement.

And just at the end of the first quarter of 2006, the platform had cumulatively enrolled over 15,500 patients. In January 2021, our intelligence to our patient matching technology secured a national invention patent, which is the first of this kind in China. This corner was focused on viewing our upstream data structuring capability and connecting it with a matching engine. Across part of our service workflow, the platform has now established a standardized pipeline from the data structuring to intelligent project matching, promptly generating suitability recommendation against the trial protocol Supported by these AI capabilities we continue to build our case library medical case library and complex indications and rare cancers with a more balanced mix across therapeutic areas, strengthening the foundation for sustainable medium-term to long-term growth.

And that covers our core funding and the healthcare business.

Hello everyone, this is Xu Xiaoying. I will now hear through our financial headlines for the first quarter of 2006. Before I go into details, please be reminded that all members who are here will be in R&D, and please refer to our earnings release for detailed information on our financial performance on both year-over-year and quarter-for-quarter basis respectively. In the first quarter of 2006, 40-October revenue reached $1.24 billion, up 64.8% year-over-year, sustaining a rapid growth.

In fact, second, the insurance-related income contributed approximately $1.15 billion, up 74.1% year-over-year, Well, non-insurance business together accounted for about 7.8% of the revenue, with profiling services of approximately $60.73 million, and digital community control solution income of approximately $24.2 million. According to cost, our total operating costs in expenses for this first quarter were approximately $1.15 billion at about 71.5% year-over-year. Operating costs for this quarter reached $487 million at 30.1% year-over-year, driven by our business extension. Cost of referral and services increased by about $53.9 million, while short-message service costs and personal costs rose by $38.9 million and $7.3 million, respectively. A thousand marketing expenses reached $541 million, a significant increase from $172 million in the same period last year, mainly because we progressively scaled up traffic investment over the past year and reinforced momentum.

Marketing expenses for third quarter traffic channels rose by approximately $361 million here over the year. General and administrative expenses were $71.7 million, down 4.3% year-over-year, mainly due to the lower professional services this quarter. Research and development expenses were about $62.7 million, a 11.5% year-over-year increase. Currently due to approximately $6.7 million rights in cloud and technical services.

For the first quarter, operating profits was around $79.95 million, a modest-year-old bearing price of 5.3%. However, affected by the net operating items in this quarter, the net profit attributable to ordinary shareholders of approximately 98.4 million, down 9.1% year-over-year. As of the end of March 2026, the company maintained an Envo Cash Reserve with cash and cash equivalents and other cash positions totaled about approximately 2.88 billion. It's $2.88 billion.

And on the capital return, since our APO through May 1, 2026, we accumulated repurchase a total of approximately $61.8 million ADS for about $120 million. And recently completed cash dividends over approximately $10.8 million. dollars. Overall, the growth momentum of our core business agreement is strong. In the first quarter, we'll have still over 64.8% year-over-year revenue growth. By stepping up, the investment in traffic and AI continues to strengthen our long-term competitiveness.

Ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

Thank you.