Yuanbao Inc (YB) 2025 Q1 法說會逐字稿

Ladies and gentlemen, good day and welcome to Yuanbao 's Inc's first quarter 2025 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Cassie Yuan, Investor Relations Manager. Please go ahead.

Thank you operator. Please know that today's discussion will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1,995. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors.

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 Yuanbao'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 it forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures. For definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results. Please see the earnings release issued earlier today.

Joining us today on the call from Yuanbao's senior management, Mr. Rui Fang, our Chairman and Chief Executive Officer, and Mr. Rui Fang, our Chief Financial Officer. Mr. Fang will deliver his remarks in Chinese, followed by an English translation. We will conclude the call with the Q&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. Fang. Please go ahead, sir.

(spoken in foreign language)

(interpreted) Hello everyone. Thank you for joining our first quarter 2025 earnings conference call. Our first earnings call since the company's IPO on April 30, 2025, Yuanbao was successfully listed on the Nasdaq, marking the start of our new journey as a public company.

On behalf of all our employees. I would like to extend my heartfelt gratitude to our shareholders, new and long standing alike, for your trust and tremendous support. Next, I'm pleased to present our stellar first quarter financial and operational performance.

In the first quarter of 2025, we achieved solid broad-based revenue growth, with total revenues increasing by 43.8% year over year to RMB970 million. At the same time, our profitability expanded with strong momentum. Net income surged by 122.1% year over year to RMB295 million, with a net income margin of 30.4%.

This marks our 11th consecutive quarter of profitability, reflecting our continuous operational efficiency gains, in addition. As of the end of March, we have RMB2.77 billion in cash reserves, serving as a robust financial foundation for ongoing business development. This impressive financial results were driven by robust growth in our operational metrics.

In the first quarter, our core operational metrics maintained double digit growth, with the number of new policies increasing by 21.3% year over year to RMB6.8 million. The dual improvement in operational and financial metrics once again demonstrates the resilience of Yuanbao's business model and our ability to sustain profitability.

(spoken in foreign language)

(interpreted) We also extensively advanced business development and innovative technology this quarter. On the consumer front, we continue to enhance customer acquisitions through our proprietary full consumer service cycle engine, Leveraging our deep insurance industry expertise and key insights into consumer preferences. We consistently refined and scaled our user profiling.

These capabilities allows us to efficiently expand our consumer reach, across a wide range of digital channels and offer tailored products and premium services. We target mid and lower tier cities and less developed regions underserved by traditional insurance services, actively promoting the accessibility and penetration of inclusive health insurance among broader populations.

Our engine plays a critical role in the effective execution of this strategy. With this strategic goals in mind, we continue to ramp up our AI investments. As of the end of March, over 10% of our workforce is focused on AI innovation, laying a solid groundwork for the ongoing iteration of our engines.

An interconnected network of models is the key pillar of our engines. These models enable us to operate across scenarios ranging from consumer targeting and acquisition to claim settlements and post-sale services, empowering us to identify and iteratively refined personalized service pathways for every potential consumer.

As of the end of March, we have developed over 4,700 models capable of analysis across more than 5,100 labels, an increase of 600 models and 1,000 labels from a year ago. This labels are fed into each model to drive continuous iteration and optimization of all models, giving us deeper insights into consumers' risk profiles and protection needs.

This allows us to efficiently offer personalized insurance products, enhance customer satisfaction, and jointly developed customized products and solutions, with our partner insurance carriers, further enforcing Yuanbao's leading position within the industry value chain.

(spoken in foreign language)

(interpreted) Meanwhile, we are integrating large language models throughout our business from scenarios such as consumer targeting, acquisition, conversion, claim settlements, and post-sale services all the way to our daily operations, steadily boosting operational efficiency.

For example, we developed and implemented an intelligent quality inspection agent, based on LLM that can autonomously play and coordinate multiple tasks, including keyword inspection, process inspection, and service attitude inspection. Accessibility enables rapid deployment and reuse of complex inspection scenarios, significantly enhancing inspection efficiency.

We are also developing agents to empower other operational areas, ultimately improving process efficiency. In addition, by integrating rack, we have built an LLM service system enriched by a specialized insurance knowledge database, effectively addressing the limitations of generic LLMs in processing specialized insurance knowledge.

For instance, while responding to user inquiries about insurers' knowledge of products, [rag] allows LLMs to retrieve and reference relevant content from the specialized database, substantially improving the resolution rates of user inquiries. We have also leveraged multi-modal LLMs to integrate text, image, and other data types, enabling automated recognition of claims materials.

This has comprehensively optimized the claim settlement process. With a single Apple users claims materials are automatically recognized, categorized, and reviewed by LLN, greatly simplifying the workflow and substantially improving service efficiency over traditional OCR technologies.

Internally, we have developed a systematic training framework to advise company-wide AI applications across all business lines. Furthermore, we have incorporated AI proficiency into employees OKRs and KPIs, empowering every employee to adapt and grow amid this new wave of AI empowerment.

(spoken in foreign language)

Before we wrap up, I'd like to highlight our proactive role in driving industry development. In January this year, we jointly released the 2024 China Online Insurance Development Report with the Research Center for China Insurance and Pension finance at Tsinghua University PBC School of Finance.

As one of the few comprehensive and in-depth studies on the online insurance industry in recent years, this report offers critical strategic guidance and data-driven support for industry development, further strengthening Yuanbao's leadership and professional influence across the sector.

From day one, Yuanbao has remained dedicated to a consumer centric philosophy, striving to deliver high quality insurance service experiences to a wide range of users. This ethos is more than just a core metric for marrying customer value creation. It is a cornerstone of our long term sustainable business growth, and a key expression of our commitment to actively fulfilling corporate social responsibility.

Looking ahead, we will continue to advise AI innovation and consistently unlock our platform's potential to meet customers involving insurance needs. Meanwhile, we will consistently refine and enhance our full cycle consumer service system and different synergies with insurance carriers, creating greater value for our shareholders. Now, I will turn the call over to our CFO, Huirui Wan to present our financial results. Thank you everyone.

Thank you, Mr. Fong. Thank you all for joining today's earnings conference call. I'm pleased to share our financial performance of the last quarter. We delivered a solid start to the year, characterized by resilient revenue growth, improving profitability, and significant enhancements in cash position.

Total revenues for the first quarter reached RMB971.1 million, representing a robust 43.8% year over year increase. This growth was primarily driven by continued momentum across both insurance distribution and system services businesses, reflecting the increasing demand and engagement from both consumers and insurance partners.

Breaking this down, insurance distribution services revenues rose to RMB321.8 million, up 45% year over year, due to an increasing number of policies transacted on a platform, partly supported by enhanced target targeted marketing efforts.

System services revenues reached RMB647 million, up 43.2% year over year, driven by constant improvements to our full consumer service cycle engine, which bolstered our enhanced marketing and precise analytics services, as well as strengthened system services, service offerings for both existing and new insurance carriers.

Moving to expenses, total operating costs and expenses increased by 24.1% year over year to RMB680.6 million. Operation and support expenses came in at RMB44.8 million, up 16.8%, primarily due to business growth. Selling and marketing expenses grew 15% to RMB493.2 million, as we enhance our efforts to attract new consumers and retain existing customers.

In general and administrative expenses, rose 50.7% to RMB60.6 million, primarily due to higher salary and benefits expenses. R&D expenses more than doubled, increasing 104.5% to RMB70, RMB76.1 million, primarily due to intensified research and development efforts and the expansion of R&D personnel to enforce our leadership position as a technology-driven online insurance distributor.

As a result of this strong top line growth and discipline cost management, our profitability improved significantly. Net income was RMB295.1 million, an increase of 122.1% year over year, with a net income margin of 30.4% compared to 19.7% in the same period last year. Non-GAAP adjusted net income rose 103.2% to RMB312.2 million.

Representing a non-GAAP net income margin of 32.2%, up from 22.8%. We also maintain our strong cash flow and healthy cash position. Net operating cashing flow was RMB425.1 million. As of March 31, 2025, our cash and cash equivalents, time deposits, restricted cash, and short-term investments totaled RMB2.77 billion, compared with 2.34 billion as of December 31, 2024.

In closing, the early momentum we've achieved sets a positive tone for the year ahead. The solid financial foundation and robust cash reserves, we are well positioned to drive our strategic initiatives and seize new opportunities for a sustainable future growth.

Thank you. And I would like now to open the call to Q&A operator, please go ahead.

(Operator Instructions)

Amy Chen, City.

Hi. Thank you for giving me this opportunity to raise questions. This is Amy from City Research. My first question is regarding your first-year premium growth. We noted that, you booked quite robust total revenue growth, and, we're just wondering how is the sales momentum in the first quarter and has this momentum continued into the second quarter?

The second question, I have is that, we noted a news reporting that the Consumer Interest Protection Committee in Shanghai actually raised a few, alerts or comments regarding some, less appropriate selling behaviors of internet insurance products and a few brokers were named in this, news, including an insurance overdraft, etc.

Has this impacted your sales in the past few weeks, and what kind of measures would you take to ensure full compliance during sales process? And the third question is regarding your AI model efficiencies as we noted that, the percentage of marketing expenses, out of total revenue actually declined year over year.

But what I'm wondering is that do you expect to see continued efficiency improvements or, eventually there will be a ceiling at some point. Thank you.

Thank you, Amy. This is Rui Wan. I'll take the Q&A question. The first question on FYP, as Mr. Fong mentioned his remarks, our core operational metrics maintained double-digit growth in the first quarter. First year premiums reached R&B9.5 billion, up 35.3% year over year. Now we didn't give second quarter guidance, but we expect a double-digit growth in FYP for the full year of 2025.

Next question regarding, the issued risk alert. So we're fully aware of the recent risk alert issued by the Shanghai Consumer Interest Protection Committee. Now, we have not been named in this report and has had no direct impact on our business. Compliance has always been a top priority for us. We built a full insurance sales management system that follows.

All regulatory requirements, so covering every step of the sale process. Our goal is to make sure that consumers' rights are fully respected and protected. In response to the risk alert, we've established and improved our compliance management system and related mechanisms to achieve comprehensive coverage and at the control of the associated risks.

Additionally, and lastly, we will continue to conduct dynamic monitoring, evaluation optimization, iteratively upgrading our products and services to provide consumers with more reassuring and convenient insurance experiences. Your third question regarding a model efficiency is whether there's going to be a ceiling at some point.

The short answer is no. Our engine is composed of a deeply integrated and highly scalable model architecture, networks of interconnected models, and a suite of systems and tools. So in addition to that, every aspect of our operations can be made more efficient leveraging AI. We believe there's still considerable potential for optimization in our engine.

We will continuously iterate the model, build more models, extract more data insights, and further improve the accuracy of the model's predictions. As we mentioned in the earnings relief, in the first quarter, we also made a lot of optimization systems and tools by applying LLMs.

We're developing agent applications based on OpenAI agent SDK, released by OpenAI, open source, which enables us to quickly build and assemble agent workflows and complete business empowerment. And also with the recent release of open source LLMs, we follow up with adopting models such as DeepSeek-R1, Q1 3 series, Q1 2.5, VL and COG4.

So internally we've deployed multiple locally hosted LLMs to build and built an internal LM API platform using Light LLM, enabling our R&D teams to quickly access and develop with these elements. In the following quarters of this year, we will also conduct more explorations and implementation in these aspects to enhance the efficiency of our operations as well as our engines. Thanks.

Thomas Wang, Goldman Sachs.

Thank you. Congrats on the on the Yuanbao's results. Couple of questions. Firstly, maybe can you give some, color on first quarter take rate and commission rate; and then secondly, we, we've seen, some of the platform like [Me] and [JD] they provide social insurance, for delivery personnel. Just want to check whether you see any impact from that on your business. Thank you.

Thank you, Thomas. So the premium per policy in the first quarter increased because we made some product adjustments. We've always been trying to jointly customize insurance products with insurance carriers, making them more attractive to consumers.

In the first quarter of this year, we promoted some products with lower deductibles and better production. The premiums of these products, as a result, increased marginally as they offer more value to consumers. For the take rate, quarterly fluctuations are not meaningful due to many factors. However, from the perspective of this year, our take rate will remain relatively steady.

I would also like to add that since we always focus on optimizing our ROI banking growth and profitability. Takeway is only one of the factors among many, such as price per policy, cross-selling, CAC, etc. that we need to consider in tandem.

Now with respect to our CAC and ROI from our financial performance, it can be seen that we've consistently maintained an ROI for at least, over one for at least 11 quarters. In the first quarter of 2025, the proportion of our sales and marketing expenses to revenue was 50.8%, a decrease of 12.8% compared with 63.6% in the same period last year.

This reflects the efficiency improvement of our engine and the company's strategic goal of continuously pursuing a better ROI. Your last question regarding, Meituan JD providing social insurance for delivery personnel.

So we don't see any net impact from JD or Meituan providing social insurance to the delivery personnel. In fact, we think of it as a positive. What they're offering is government provided social insurance while we provide commercial insurance. The two are fundamentally different and complementary.

Our commercial health insurance serves as an upgrade, primarily targeting those with social medical insurance, and obviously for those without social medical insurance coverage, we offer our commercial health insurance with a different term and pricing. Hence, providing social insurance for delivery personnel is beneficial to our overall business.

Social insurance typically covers everyday, lower cost medical needs like outpatient visits. Our products, by contrast, protect against major risks, serious illness or accidents, helping individuals and families avoid financial hardship from unexpected high-cost events.

What also sets us apart is our ability to provide tailor protection. For example, if the user is a delivery worker frequently on the road or away from home, we may recommend adding coverage for traffic accidents or out of town hospitalization to better match their real world risks and needs.

So overall, we see these developments as helping to raise the insurance awareness, and we remain focused on delivering flexible high-value protection that fills the GAAP that social insurance doesn't cover. Thank you.

Thank you for the questions. And that concludes the Q&A session. So I'd like to turn the conference back over to management for any additional closing or comments.

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or personal financial communications. Our contact information for IR in both China and the US can be found in today's press release. Have a great day.

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.