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. (Event Instructions) As a reminder, today's conference is being recorded.

Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provision of the US Private Securities and 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 are 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 in 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. Jieru Li, Board 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 RMB970 million, up 38.4% year on year. Meanwhile, AI plays a significant role in enhancing business quality and efficiency, driving net profit attributable to the ordinary shareholders to about RMB160 million, a year-on-year increase of 60.1%.

For the first three quarters of 2025, the company's total revenue amounted to RMB2.67 billion, up 23.1% year on year, while net profit attributable to ordinary shareholders reached about RMB410 million, rising 51.9% compared to the same period last year. The company has maintained a GAAP profitability for 15 consecutive quarters since the first quarter of 2022.

By segment, backed by the full integration of AI, our InsurTech business continued its solid performance, with operating profit reaching about RMB180 million in this quarter, a year-on-year increase of [44.3%]. The Medical Crowdfunding platform maintained stable operations and has led the medical campaign for accumulating a total of 3.61 million patients as of the end of this quarter. The Digital Clinical Trial Solution business continued to excel in project fulfillment, enrolling over 1,000 patients in one single quarter, demonstrating robust growth momentum.

This quarter, we continued to invest in AI. As of the end of September, the company has developed 69 patent applications centered on large language models, including nine international filings. 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 version.

In this key move to systematically manage live our AI capabilities, we launched Waterdrop Sea.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 apps, websites, and WeChat official accounts. Going forward, we will also explore its applications in non-insurance areas, providing strong support for the company's growth.

Waterdrop's plan in sustainable development is dedicated to creating value for society. In this quarter, we updated our ESG measures, released the 2024 annual ESG report, and disclosed multiple 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's Civil Affairs Bureau, we established the Waterdrop CoHealth Program, which allows patients in need to apply for assistance online and offline, providing an innovative model that integrates government and 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 ADSs 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, fueling sustainable long-term growth.

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

Hi, everyone. This is Ran Wei.

In the third quarter, our Insurance business maintained significant growth momentum. Insurance-related revenue reached about RMB870 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 lakes among advertising, operation, and risk control systems. The integration slashed our end-to-end decision latency to under 50 milliseconds. Such a response speed allowed us to generate more comprehensive decision-making and perform precise stratification immediately upon receiving an advertising requirement, thereby enhancing the ability to identify and filter high-quality traffic. As a proportion, we continue to increase through integration.

We also matched 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, including 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 Quan Jia Fu Family Protection Plan, which covers up to nine family members under one single policy, and upgraded Guo Min Bao Mid-to-High-End Medical Insurance with an expanded network of quality private hospitals.

For critical illness insurance, we further enriched our (inaudible) series by introducing modular options tailored to diverse budget needs. We also upgraded the Wu You Shou Hu Disability Insurance series. It has achieved a comprehensive coverage ranging extensive protection. Pre-existing condition insurance contributed about RMB400 million in FIP during this quarter, a year-on-year increase of 103.9%.

On the service side, we deployed AI more widely, enhancing operational efficiency. We expanded 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 Expert continued to boost efficiency. In the third quarter, it assisted in achieving an 82% increase in FIP compared to the Q2. In the Wecom service scenario, the per-lead productivity of AI Medical Insurance Expert in September doubled to that of June.

AI application also continues to empower long-term insurance services. As of the end of this quarter, the knowledge base to AI Life Planner Copilot had cumulatively assisted in over 340,000 insurance product-related consultations. The underwriting assistant, KEYI.AI, reduced the response time from underwriting cases for the traditional manual model of five minutes to one second.

The AI Super Pre-Sales Assistant has consistently maintained higher APL than the human agent. And beginning in September, the scenario has been fully transitioned to AI operations. In after-sales services, our AI Customer Service Agent now can handle over 600,000 inquiries in one month, solving 85% of online cases independently. At the end of September, we launched Waterdrop Sea.AI, a low-code platform that is evaluating 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 Crowdfunding and healthcare sectors.

As of September 30, 2025, approximately 485 million people have cumulatively donated a total of RMB71.2 billion to 3.61 million patients through Waterdrop Medical Crowdfunding. In the third quarter, we focused on strengthening the campaign risk control measures. We expand core scenarios, technically incorporating differentiated modifications to our workflow, which boosted 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 the course of the request review and potential usage of funds. With real-time display review timeline and the reviewer's identification of benefits, this now gives donors clear insight into how their contributions and how their donations are allocated and used. These measures have profoundly enhanced the transparency, rationality, and the traceability of fund distribution.

And our healthcare business continued strong performance this quarter. The E-Find Platform expanded the 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 a cumulative enrollment of more than 13,000 patients. One of the largest is 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 gynecological tumor, quarterly enrollment increased by 130% compared to the previous full quarter average level.

The company has also made significant strides in chronic disease. Building on its existing focus on skin disease, respiratory conditions and psoriatic hypertension, the company has expanded its disease coverage into rheumatology and immunology.

Enhancing digital matching accuracy between patient database and project libraries remains 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, Waterdrop consistently delivered satisfactory fulfillment quality, driving sustained order growth. As a result, the 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 applications in medical patient 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 medicine, serving hundreds of thousands of patients and profoundly improving service efficiency and user experience.

Now, I will hand it over to Xiaoying, 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. Crowdfunding service fees stood at around RMB65.66 million, remaining stable year on year. And Digital Clinical Trial Solution 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 costs was lower than the revenue growth, further boosting profitability. Operating costs for this quarter reached RMB475 million, up 39.5% year on year, driven by a RMB66.7 million rise in costs of referral and service fees, along with RMB32.4 million and RMB16.9 million increase in personnel costs and the cost of Crowdfunding consultants team.

Sales and marketing expenses amounted to RMB243 million, rising 40.3% year on year. This was mainly about the enhanced AI application, which improved the user identification accuracy and conversion rate. Based on this, we boosted our traffic investment, resulting in a RMB79 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 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 cloud server expenses 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 a programmatic -- 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.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.