Waterdrop (WDH) Q3 2025 earnings call transcript

Good morning, everyone. This is Tracy Lee from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's third quarter 2025 earnest conference call, all participating in a listen-only mode in our English line. As a reminder, today's conference is being recorded. Please note that the discussion today will come as overlooking statements made under the State Harbor Commission of the U. S. Private Security and the Litigation Reform Act of 1995. Five, forward-looking statements are subject to risk and uncertainty that may cause actual results to differ materially from our current expectations.

Potential risk and uncertainty includes but not limited to those offline in our public filing with SEC. The company does not undertake any obligation to update any forward-looking statements except as required and applicable law. Also, this call includes discussion of certain NAMGAS measures. Please refer to our earnings release for consideration. between NGAP and GAP. Joining us today on the call are Mr. Yang Wei, Director and GM of Insurance Business, Ms. Xu Xiaoyi, Head of the Finance Department, and Ms. Jie Wu Li, Board Secretary.

We'll be happy to take some of the questions in the menu line at the end of the conference call. In third quarter, the company continued its growth trend with overall revenue reaching over 970 million at 38.4% year-on-year. Meanwhile, AI played a significant role in enhancing business quality and efficiency, driving net profit attributable to the ordinary shareholders to about 160 million, a year-on-year increase of 60.1%. For the first three quarters of 2025, the company's total revenue amounted to $2.57 billion at 23.1% year-on-year.

Well, net profit attributable to ordinary shareholders reached about $410 billion, rising 51.9% compared to the same period last year. The company has maintained a gas profitability for 15 consecutive quarters since the first quarter of 2022. By segment backed by the full integration of AI, our insure tech business continues a solid performance with operating profit reaching about 180 million in this quarter, a year-on-year increase of 44.5%. The medical profile platform maintains stable operations and has raised medical campaigns for accumulating a total of 3.61 million patients as of the end of this quarter.

The digital clinical trial solution business continues to excel in project fulfillment. It rolled over 1,000 patients in one single quarter, demonstrating robust growth momentum. This quarter, we continue to invest in AI. As of the end of September, the company has built 69 patent applications centered on large language models, including my international findings. During this quarter, our intelligent chatbot has been upgraded to a new hybrid attention mechanism. This updated system can select the appropriate reasoning method more flexibly, making it better at understanding and handling long conversations. The inference throughput currently is double that of the original burden.

In a key move to systematize our AI capabilities, we launched a Waterdrop C-Point AI in late September, a low-code AI platform that empowers our employees to smoothly view and deploy tailored solutions from various tasks such as marketing and customer service across apps, websites, and WeChat official accounts. Going forward, we also explore applications in non-insurance areas, providing strong support for the company's growth.

One of the jobs grounded in sustainable development is dedicated to creating value for society. In this quarter, we updated our ESC measures, released the 2024 annual ESC report, and disclosed local new environmental data, and continues to enhance our ESC governance framework.

In public welfare, as of September 30, 2005, Woodruff Charities Club has collaborated with 119 charities and launched on more than 16 projects Together with Guangzhou Civil Affairs Bureau we established the OneDrop Co Program which allows patients in need to apply for assistance online and offline providing an innovative model that integrates government and the individual content. We extend our appreciation to our shareholders for their enduring trust and support. In early November, we completed our fourth cash dividend distribution since IPO with a total payout of around $10.9 million. By the end of November 2005, we had repurchased approximately $58.1 million ADS in the open market, totaling $113 million. Building on our robust business performance, we are confident in existing full-year revenue and profit guidance.

Moving forward, we will leverage advancing AI technologies to drive integration and innovation across our operations, feeling sustainable long-term growth. Next, I will talk to Rambe to introduce the development of insurance business in Q3.

Hi, everyone. This is Rambe. In the third quarter, our insurance maintenance maintenance growth momentum. Insurance-related revenue reached about 870 million, increasing by 44.8% year-on-year and 70.8% quarter-on-quarter.

The business achieved an operating profit margin of 20.3%. This quarter, we optimized our real-time identification capabilities in public traffic scenarios. At the data infrastructure level, we fully integrated the data links among advertising, operation, and risk control systems. The integration slashed our end-to-end decision latency to under 60 milliseconds. Such a response speed allows us to generate more comprehensive decision making and perform precise stratification immediately upon receiving and advertising requirements, thereby enhancing the ability to identify and filter high quality traffic. At this proportion, we continue to increase through iteration. We also match users with suitable coverage options based on their specific needs and payment capacity. Now the entire system is deeply integrated with our corporate data lake and AI platform, supporting self-training and health updates to continually refine our marketing strategies.

On the supply side, we continue to drive product innovation. In this quarter, we introduced Chenjia-Fu's Family Protection Plan, which covers up to nine family members under one single policy, and upgraded Guomingbao, leads to high-end medical insurance with an expanded network of quality private hospitals. For critical illness insurance, we further enriched our 守户拳害 series by introducing modular options tailored to diverse budget needs. We also upgraded the 守户 disability insurance series and have achieved a comprehensive coverage ranging extensive protection. Reexisting condition insurance contributed about $400 million in FIT during this quarter.

A year-on-year increase of 103.9%. On the service side, we deployed AI more widely, enhancing operational efficiency. We extended the rollout of AI Pro Insurance module on our WeChat Mini Program homepage. This LLM-powered module offers users real-time Q&A and personalized recommendations, driving a 36% sequential increase in facilitated FIP.

In voice services, AI medical insurance experts continue to boost efficiency. In third quarter, it assisted in achieving an 82% increase in FIP compared to the Q2. In the week on the service narrow the per lead productivity of AI medical insurance experts in September doubled the last of June AI application also continued to empower long insurance services At the end of this quarter the knowledge base tool of AI life planner co-pilot had cumulatively assisted in over 340,000 insurance products related consultations. The underwriting assistance, and He Yi Point AI reduced the response time from underwriting cases for the traditional manual model of five minutes to one second.

The AI super pre-cell assistant has consistently maintained higher ATL than the human agent. And beginning in September, the scenario has been fully transitioned to AI operation. In after-sell services, our AI customer service agent now can handle over 600,000 incurs in one month, solving 85% of online cases independently. it even really. At the end of September we launched the Waterdrop Seapoint AI, a local platform that is accelerating the development of AI application across multiple business scenarios. That concludes our insurance update in this quarter.

Hi Andy, now I will walk you through the third quarter's progress in co-founding and healthcare sectors. As of September 30, 2025, approximately 485 million people had accumulated a total of 71.2 billion to 3.61 million patients through water job medical co-founding.

In this, the third corridor, we focus on strengthening the campaign risk control measures, We have some core scenarios strategically incorporating differentiation-aided modification to our workflow, which boosts the efficiency of the review process. By analyzing donation visit data to identify structural patterns, advanced analysts now can refine the identification capabilities of our algorithm model. This, in turn, has improved automatic early warning systems to better detect and reduce fraud.

Additionally, the platform continues prioritizing the transparency of campaign authenticity. This quarter, we fortified our special case review mechanism by fully disclosing course of the request review and potential usage of bonds. with real-time display of review timeline and the reviewers' administration status. This now gives donors clear insight into how their contribution, how their donation is allocated and used.

This matters have profoundly enhanced the comparison, rationality, and traceability of bond distribution. And our healthcare business continues to strong performance this quarter. The eFind platform expanded collaboration network by Conor with 216 pharmaceutical and contract research organizations. Meanwhile, we initiated services for 125 new programs. For the first time, we successfully enrolled over 1,000 patients in one single quarter. Since it launched, the program has achieved an accumulated enrollment of more than 13,000 patients. We have launched a massive patient database and advanced digital ability to expand collaboration projects in areas like psoriasis tumors and digestive tumors, accelerating clinical development process of our partners. Notably, in the challenging field of oncological tumor, quarterly enrollment increased by 130% compared to the previous full corporate average level.

The company has also mixed significant strides in chronic disease. Building on an existing focus on the skin disease, respiratory condition, and psoriasis, hypertension, the company has expanded its disease coverage into the rheumatology and the immunology. Enhancing digital matching accuracy between patient database and the project library remain a key strategic focus for Waterdrop. This quarter we upgraded our algorithm medical data structure matching enabling a thriving performance across multiple high quality high difficulty projects. Through the ecosystem synergy and refined project operations the Waterdrop consistently delivers satisfactory fulfillment policies strategies to stand other growth As a result the digital clinical trial solution in town in the third quarter reached 31 units marking a 31.3% year-on-year increase.

In the digital only channel marketing, we advanced LLM-powered applications in medical patients' various scenarios, launching projects in patient health management, knowledge promotion, and digital humans. The company secured a three-year contract with a world-leading pharmaceutical for patient management, serving hundreds of thousands of patients and profoundly improving service efficiency and user experience. Now I will hand it over to Hsia Yim, our head of finance department, to discuss our financial performance in this quarter.

Hello, everyone. I will now walk you through our financial highlights for the third quarter of 2025. Before I go into details, please be reminded that all numbers quoted here will be in R&D, and please refer to our earnings release for detailed information on our financial performance on both the year-on-year and quarter-on-quarter basis, respectively.

In the third quarter, the company reported a total revenue of $975 million, marking a year-on-year growth of 38.4%, reflecting a strong growth trajectory. By segment, our insurance business generated about $870 million in revenue, at 44.8% year-on-year. For funding service fees, students at around $65.66 million, remaining stable year-on-year. and digital clinical trial solutions contributed over 31.85 million yen, with a year-on-year increase of 31.3%. Operating costs and expenses totaled approximately 861 million yen, marking a year-on-year increase of 27.1%. This gross rate of operating costs was lower than the revenue growth, further boosting profitability.

Operating costs for this quarter reached $475 million at 39.5% year-on-year, driven by $66.7 million in cost of referral and service fee, along with $32.4 million and $16.9 million increase in personal costs and the cost of performing consultant teams. Stock and marketing expenses amounted to $243 million, rising 40.3% year-on-year. This works mainly because of the enhanced AI application, which improves the user identification accuracy and conversion rate. Based on this, we boosted our traffic investment, resulting in $79 million year-on-year rise in the marketing expenses for the third-party traffic channels.

General and administrative expenses declined 23.7% year-on-year to $84.7 million. Key factors include a $15.6 million reduction in personal costs and the absence of last year's $20.6 million impairment loss, which contributed to the Delta Inc. decrease. The R&D expenses rose 10.2% to over $58.3 million, with personal costs and cross-server expenses and other technical support expenses increasing by $3.2 and $2.7 million, respectively, compared to the same period of 2024. In this quarter, the company reported an operating profit of nearly $114 million, marking a substantial year-on-year increase of 329.8%. Net profit attributable to the company's auto-nourished shareholders reached $158 million, up 60.1% year-on-year.

At the end of the period, the company held an ample cash position of about $3.61 million, and then operating tax will remain positive, providing firm financial support for business expansion and technological development. And in summary, during this quarter, we focused on refining management while achieving scale growth. Moving forward, the company will advance with greater productivity and a program and sort of strong act to reach a new stage of development.

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