Waterdrop Inc (WDH) 2025 Q3 法說會逐字稿

Good morning, everyone. This is Tracy Li from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's Third Quarter 2025 Earnings Conference Call. (Operator Instructions) As a reminder, today's conference is being recorded. Please note that discussion today will contain forward-looking statements made under the safe harbor provision of the 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. Potential risks and uncertainties include but not limited to, those outlined in our public filings with the 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 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. Ran Wei, Director and GM of Insurance Business; Ms. Xu Xiaoying, Head of Finance Department; and Ms. Jasmine Lee, Corporate Secretary. We'll be happy to take some of the questions in the Mandarin line at the end of the conference call.

In the third quarter, the company continued its growth trend with overall revenue reaching over CNY970 million, up 38.4% year-on-year. Meanwhile, AI play a significant role in enhancing business quality and efficiency drugging net profit attributable to the ordinary shareholders to about CNY150 million, a year-on-year increase of 60.1%.

For the first three quarters of 2025, the company's total revenue amounted to CNY2.67 billion, up 23.1% year-on-year. Well, net profit attributable to ordinary shareholders reached about CNY410 million, rising 51.9% compared to the same period last year. The company has maintained a GAAP (inaudible) for 15 consecutive quarters since the first quarter of 2022.

By segment, backed by the full integration of AI, our (inaudible) business continued its solid performance with operating profit reaching about CNY180 million in this quarter, a year-on-year increase of 44.8%. The medical performance platform maintains stable patients and has priced medical campaign for cumulative total of 3.1 million patients as of the end of this quarter. The digital critical trial solutions business continued to excel in project focus, erode 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 sell 16-month patent application business on large (inaudible) including my international filings.

During this quarter, our intelligent chatbot has been upgraded to a new hybrid attention mechanism. This updated system can select the appropriate rec method more flexibly, making it better at understanding and handling long conversations. The inference throughput currently is double that of the original. In a key move to systematic like our AI capability, we launched AI in late September, a low-code AI platform that empowers our employees to smoothly view and deploy tailored solutions for various tasks such as marketing and customer service across app website and WeChat official up.

Going forward, we will also explore its application in noninsurance areas, providing strong support for the company's growth. Waterdrop in sustainable development is dedicated to creating value for society. In the quarter, we updated our ESG matter, released the 2024 annual ESG report and disclosed global new environmental data and continue to enhance our ESG governance framework.

In public welfare, as of September 30, 2025, Waterdrop Charity platform has collaborated with 119 charities and launched more than 15,500 projects. Together with Guangzhou Civil Affairs Bureau, we established the Waterdrop CoHealth program, which allows patients in need to apply for a visit online and offline, providing an innovative models that integrate government ads and the individual campaigns.

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 2025, 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 addressing full year revenue and profit guidance. Going forward, we will leverage advancing AI technologies to drive integration and innovation across our operations, giving sustainable long-term growth.

Next, I will pass to Ran Wei to introduce the development of insurance business in Q3.

Hi, everyone. This is an Ran Wei. In the third quarter, our insurance business maintained significant growth momentum. Insurance-related revenue reached about CNY870 million, increasing by 44.8% year-on-year and 17.8% 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 names among advertising, operation and risk control system.

The integration slashed our end-to-end decision latency to under 50 milliseconds. Section response feed allow us to generate more comprehensive decision-making and perform precise stratification immediately upon receiving an advertising requirements, thereby enhancing the ability to identify the future high-quality traffic. As a proportion, we continue to increase through iteration. We also match user with suitable coverage offerings based on their specific needs and payment capabilities and the payment capacity.

Now the entire business is deeply integrated with our corporate data leak and AI platform, (inaudible) training and health update to continually refine our marketing strategy. On the supply side, we continue to drive product innovation. In this quarter, we introduced (inaudible) family protection plan, which covers up to nine family members in their one single policy and upgraded mid-to high-end medical insurance, with an expanded network of quality private hospitals. For critical illness insurance, we further enriched our (inaudible) series of introducing modular options tailored to diverse budget needs. We also upgraded the (inaudible) disability insurance series and have achieved a comprehensive coverage for intensive protection.

Pre-existing condition insurance contributed about CYN400 million in FIP during this quarter, a year-on-year increase of 103.9%. On the service side, we deploy AI more widely, enhancing operational efficiency. We expanded the rollout of AI Pro insurance model on our WeChat Mini Program homepage. This is LLM powered model offers users real-time Q&A and personalized recommendations, forming a 36% sequential increase in facilitated FIP. In Voice services, AI medical insurance expert continued to boost the efficiency.

In third quarter, it assisted in achieving an 82% increase in FIP compared to the Q2. In the (inaudible) service scenario, the productivity of AI medical insurance experts in September doubled that of June. AI application also continued to empower long-term insurance services. As of the end of this quarter, the knowledge-based AI life planner copilot had cumulatively assisted in over 340,000 insurance product-related consultations.

The underwriting assistant (inaudible) AI reduced the response time from underwriting cases for the traditional manual model of five minutes to one second. The AI super presales assistant has consistently maintained higher APL than the human agent. And beginning in September, -- this scenario has been fully transitioned to AI operations. In after-sales services, our AI customer service agent now can handle over 600,000 insurers in one month, serving 85% of online cases independently. At the end of September, we launched Waterdrop C Point AI, a local platform that is accelerating the development of AI application across multiple business scenarios.

That concludes our insurance update in this quarter. Now I will walk you through the third quarter progress in corresponding and healthcare sectors. As of September 30, 2025, approximately 485 million people had stimulated (inaudible) a total of 71.2 billion to 3.61 million patients through Water Medical corresponding. In the third quarter, we focused on strengthening the campaign risk control measures. We expand core (inaudible) incorporating differentiated modification to our workflow, which boosted the efficiency of the review process.

By analyzing donation visit data to identify patterns, advanced analysts that can refine the identification capabilities of our algorithm model. This in turn has improved automatic early warning system to better detect and reduce fraud. Additionally, the platform continued prioritizing the transparency of campaign authenticity. This quarter, we fortified our special case review mechanism by only deploying course of the request review and potential usage bond with real-time display review timeline and the reviewers status.

This now gives donors clear insight into how their contribution, how their donations are allocated and used. This (inaudible) have profoundly enhanced the transparency rationality and traceability of fund distribution. And our healthcare business continued its strong performance this quarter.

The inline (inaudible) platform expanded collaboration network by partnering 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 its launch, the program has achieved cumulative enrollment of more than 13,000 patients, only allowed its massive patient database and 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 gynecological tumor, quarterly enrollment increased by 130% compared to the previous four quarter average level. The company has also made significant strides in chronic disease, building on its existing focus on the like skin disease, respiratory conditions and psoriatic hypertension, the company has expanded its disease coverage into the rheumatology and immunology.

Enhancing digital matching accuracy between patient database and contact libraries remain a key strategic focus for Waterdrop. This quarter, we upgraded our algorithm medical data structure matching, enabling thriving performance across multiple high-quality, high difficulty projects. Through the ecosystem synergy and refined project operations, Waterdrop consistently delivered satisfactory fulfillment quality, driving sustained order growth. As a result, digital clinical trial solution income in the third quarter reached RMB31.85 million, marking a 31.3% year-on-year increase. In the digital omnichannel marketing, we advanced LLM powered application in medical patient service launching products in patient health management, knowledge promotion and digital humans.

The company secured a three-year contract with a world-leading pharmaceutical for patient medicine, serving hundreds of thousands of patients and profoundly improving service efficiency and user experience. Now, I'll hand it over to Jasmine, 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 RMB, 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 total revenue of RMB975 million, marking a year-on-year growth of 38.4%, reflecting a strong growth trajectory. By segment, our Insurance business generated about RMB870 million in revenue, up 44.8% year-on-year. Corresponding service fees stood at and at around RMB65.6 million, remaining stable year-on-year and digital clinical trial solutions contributed over RMB31.85 million with a year-on-year increase of 31.3%. Operating costs and expenses totaled approximately RMB861 million, marking a year-on-year increase of 27.1%. This growth rate of operating cost was lower than the revenue growth, further boosting profitability.

Operating costs for this quarter reached RMB 475 million, up 39.5% year-on-year, driven by RMB 66.7 million rise in cost of referral and service fees, along with RMB32.4 million and RMB16.9 million increase in personnel costs and the cost of performing consultant fees.

Sales and marketing expenses amounted to RMB243 million, rising 40.3% year-on-year. This was mainly because the enhanced AI application, which improved the user identification accuracy and conversion rate. Based on this, we boosted our traffic investment, resulting in RMB79 million year-on-year rise in the marketing expenses for the third-party traffic channel. General and administrative expenses declined 23.7% year-on-year to RMB84.7 million. Key factors include a RMB15.6 million reduction in personnel costs and the absence of last year's RMB20.6 million impairment loss, which contributed to the delta decrease.

The R&D expenses rose 10.2% to over RMB58.3 million with personnel costs and cross service expense and other technical support expenses increasing by RMB3.2 million and RMB2.7 million, respectively, compared to the same period of 2024. In this quarter, the company reported an operating profit of nearly RMB114 million, marking a substantial year-on-year increase of 329.8%.

Net profit attributable to the company's ordinary shareholders reached RMB158 million, up 60.1% year-on-year. As of the end of this period, the company held ample cash position of about RMB3.51 billion. Net operating cash flow remained positive, providing firm financial support for business expansion and technological development.

And in summary, during this quarter, we focused on refined management while achieving scale growth. Moving forward, the company will advance with greater productivity and program and further 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. Have a good time.