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Waterdrop Inc. (NYSE:WDH) Q2 2023 Outcomes Convention Name September 7, 2023 8:00 AM ET
Firm Individuals
Shen Peng – Founder, Chairman & Chief Government Officer
Yang Guang – Co-Founder, Director, SVP and GM of Worldwide Enterprise
Zetao Zhu – GM of Crowdfunding and Pharmatech Enterprise
Chen Richard – Board Secretary
Convention Name Individuals
Unidentified Firm Consultant
Good morning everybody. That is [indiscernible] from Waterdrop Investor Relationships. It is my pleasure to welcome everybody to Waterdrop’s Second Quarter 2023 Earnings Convention Name. All contributors are in a listen-only mode in our English line. As a reminder, at present’s convention name is being recorded. Please word that dialogue at present will comprise forward-looking statements made underneath the secure harbor provision of U.S. Non-public Securities and the litigation Reform Act of 1995.
Ahead-looking statements are topic to dangers and uncertainties and should trigger precise outcomes to vary materially from our present expectations. Potential dangers and uncertainties embrace however not restricted to these outlined in our public filings with the SEC. The Firm doesn’t undertake any obligation to replace any forward-looking statements, besides as required and relevant regulation.
Additionally, this name features a dialogue of sure non-GAAP measures. Please confer with our earnings launch for reconciliations between non-GAAP and GAAP. Becoming a member of us at present on the decision are Mr. Shen Peng, our Founder, Chairman and CEO; Mr. Yang Guang, Co-Founder, Director, SVP and GM of Worldwide Enterprise; Mr. Zhu Zetao, GM of Crowdfunding and Pharmatech Enterprise; Mr. Chen Richard, Board Secretary.
And we might be completely satisfied to take a few of the questions within the mandarin line on the finish of the convention name.
Shen Peng
Whats up, everybody. That is Shen Peng. Thanks for becoming a member of our second quarter 2023 earnings convention name. With the second quarter, in insurance coverage and pharmaceutical business with the gradual enforcement of regulation, transparency and acceleration have considerably improved, successfully enhancing person expertise and satisfaction. This has additionally led compliance person insurance coverage corporations in breaking new development alternatives.
On this setting, the Firm’s proactively consensus regulatory developments, responds actively to market demand, frequently innovates product and optimize service and solidifying a forefront in these sectors. Regardless of the difficult exterior atmosphere, the administration firmly satisfied the adhering to long-term worth and sustaining a user-centric strategy with safe higher market area.
And within the second quarter of 2023, the Firm continues to concentrate on creating worth for our customers’ functionality wholesome improvement. The monetary efficiency stays strong with our income reached RMB679 million, carrying over an upward pattern for the final 5 quarters, the online revenue reached RMB21.7 million, demonstrating the sustainable and high-quality improvement of the Firm’s operations.
With the identical price of web revenue, the Firm maintains ample money reserves as of the top of June. The Firm had a complete of RMB3.4 billion in money, money equivalents and short-term investments. The considerable money reserves helped the Firm to face unsure atmosphere with extra confidence and help long-term pattern and format for the longer term development. All of our enterprise fashions achieved sturdy efficiency sooner or later and consolidating our main place and affect within the business.
To begin with, what’s our insurance coverage market in [indiscernible] and enhanced enterprise fatality. Whereas exploring diversified buyer acquisition channels, we additionally take the product innovation, due to the efforts what we name each SIP and income made sequential development and it continued to contribute secure web revenue to the Firm.
By way of digital scientific trial answer enterprise as a consequence of our glorious efficiency, the E-find platform good points recognition from each home and worldwide companions. We proceed to broaden the lead time and accelerating drug improvement for pharmaceutical and we’ll additionally made vital progress in CRO in Q2. Digital scientific trial answer earnings was RMB29.4 million and reaching a major year-on-year development of 167%.
As well as, by iterating algorithms capabilities and threat administration mechanism, our Waterdrop Medical Crowdfunding platform firmly adhered to father or mother operations and led us to any compassion. In the meantime, we enhanced product high quality propel our service oriented enterprise mannequin and embodies the precept of customers first service mode. Together with enterprise improvement, the Firm continued to spend money on analysis and improvement.
In Q2, the Firm continued to improve applied sciences like clever chatbot deploying AI in varied sectors, together with operations, gross sales enhancing. We strongly accelerated operational effectivity and the Firm persists in [indiscernible] know-how to empower the business, within the advanced and ever altering macro atmosphere.
The Firm carried out [indiscernible] working CSR. As of June 30, 2023, the Waterdrop Insurance coverage platform had collaborated with about 110 public charitable organizations to hold out undertaking in [indiscernible] and schooling help. This system has raised about RMB1.3 billion and raised the contribution from greater than 65 million donors.
We additionally proceed to say no ESG initiatives and attempt to realize mutual sustainable improvement between the Firm and the society. We benchmark home and worldwide ESG requirements to ascertain a compound framework and publish the 2022 ESG report. The report summarizes our firm’s administration and efficiency in areas like firm’s governance participation in multilevel medical help system, know-how innovation, inexperienced and low-carbon initiatives and public welfare.
We reveal the Firm’s dedication to top quality and sustainable improvement by way of share repurchase as of the top of August 2023. The Firm has cumulatively repurchased 37.5 million ADSs shares within the open market with money for a complete consideration of roughly $86.1 million.
We additionally wish to announce the growth of the repurchase plan, which has acquired approval from all our administrators. Inside the subsequent 12 months, the Firm will repurchase shares within the open marketplace for an quantity not exceeding $50 million. This choice relies on the Firm’s sturdy confidence in our personal worth and long-term sustainable improvement.
In the meantime, this share repurchase might be used for ESOP, which is able to additional inspire our staff. That may be a temporary evaluate of our enterprise efficiency in Q2, though going through the difficult macro atmosphere keep absolutely assured in our healthcare business.
Transferring ahead to the remaining half of this 12 months, our methods embrace enterprise pushed by a protracted and digital transformation. Insurance coverage methods will proceed to be [indiscernible] striving to realize long-term wholesome and secure improvement. In the meantime, we’ll proceed to reinforce key initiatives solidifying the enterprise basis and supply customers with skilled and software program service.
Secondly, the core funding enterprise will proceed to [indiscernible] within the first and iterating service mannequin, giving the business in direction of high-quality improvement. We may also adhere to clear operations and inclement with threat administration whereas actively fulfilling CSR. Thirdly, leveraging huge information, the pharmaceutical enterprise will proceed to extend business penetration globally and activate for a brand new mannequin with a purpose to assemble a brand new long-term development engine.
Fourthly, the Firm will make use of its ample money reserves and take operations and funding alternatives round insurance coverage and healthcare sector. Final however not least, the Firm will speed up know-how empowerment and it has AI capacity to construct core know-how competitiveness, thereby supporting the implementation of long-term methods and inherent industries.
The Firm will make use of ample money reserves and take operation and funding alternative round insurance coverage and healthcare sector. Within the present price, the Firm will repeatedly derive long-term encourage to calibrating person worth, strengthening their facility and natural development and firm [indiscernible]. We’ll proceed to deliver insurance coverage and healthcare greatest service to deliver to know-how.
And now let me offer you an replace on our insurance coverage enterprise. Within the second quarter, with a purpose to improve service expertise and enhancements, the Firm dedicated to make use of eccentric and high-quality improvement and proceed to discover new service fashions. Throughout Q2, we achieved RMB219.7 million in [indiscernible] and margins, a 30% sequential development. Insurance coverage associated income reached RMB597 million, reflecting 11% Q-o-Q for us.
Quick-term insurance coverage achieved FYP of RMB1.6 billion, marking a 30% sequential development. On one hand, the Firm additional developed our content material base both activation functionality. In Q2, we elevated our [indiscernible] shopper innovation and spreading high-quality content material throughout medical platforms resulting in a sequential development within the variety of finish customers. Alternatively, we saved accelerating our current buyer base, leveraging AI capacity.
The Firm continues to enhance the standard of customers to over 90% of short-term insurance coverage renewal price. Lengthy-term insurance coverage achieved a FYP of RMB590 million, representing a 29% sequential development. The long-term insurance coverage working earnings elevated by 38% sequentially. As long-term insurance coverage merchandise proceed to broaden, the proportion of life insurance coverage premiums throughout the long-term phase has risen to 57%.
Throughout this quarter, the [indiscernible] of long-term insurance coverage want doubtlessly leveraging the insurance coverage had been firm elevated service mannequin targeted on frequent domains narrowed and intensified person schooling, which led to a 33% of FYP from non-public area operations. The Firm is also experiencing referred to as into our coverage insurance coverage resulting in the sustained enchancment within the first 12 months retention charges for advertising product.
In Q2, Waterdrop continues to discover new development channels to facilitating sustainable enterprise development. For our on-line brokerage channel, FYP skilled a 113% sequential development with the decline in rates of interest. The Firm developed a brand new insurance coverage, which is concentrated on sickness insurance coverage and life insurance coverage to the youthful customers within the first and second-tier cities. Sequentially, the variety of customers for phase insurance coverage grew by 206% and high-quality content material and phase proceedings.
The [indiscernible] decreased by 25%. Furthermore, the workforce improved the service course of and now can management is the primary time response inside 20 minutes. This results in a 2Q improve of 49% in productiveness per lead and 30% in productiveness capital. By way of offline brokers and a few market rebound and the workforce matured, we achieved a exceptional 206% Y-o-Y development in FYP.
We proceed to reinforce product providing and operational functionality. We additional upgraded our PD system outline functioning fashions and optimizing the expertise for each brokers and purchasers. We elevated recruiting requirements and expertise in new developments and actively discover agent IP. The typical productiveness per lively brokers elevated by 201% Y-o-Y, the typical variety of long-term insurance coverage coverage for brokers elevated by 48% Y-o-Y.
Through the second quarter, [indiscernible] insurance coverage market continued to counterpoint the product providing and related product concentrating on the fundamental person development, taking common curiosity in long-term manufacturing and innovation medical remedy [indiscernible] ocean lifetime medical insurance. It has permits customers to take entry over these medical service at an inexpensive worth and shortly present an possibility for customers to move from buying medical insurance coverage on to a 20-year long-term medical insurance coverage thereby maiming the person protection, concentrating on aged, we launched the [indiscernible].
This product is the primary in China to cowl many frequent critical sicknesses among the many aged together with malignant tumors, that was listed and the annual product innovation checklist by 2023 China insurance coverage business is each rating. For wholesome particular person, we proceed to iterating our Blue Ocean sequence, which is the primary home medical insurance main healthcare declaration.
In Q2, this product sequence achieved FYP over RMB100 million. Moreover, we actively discover multichannel gross sales of [indiscernible] and insurance coverage protecting treatment, operations and emergency. We noticed a sequential improve in FYP. By way of customers with pre-existing positions, we proceed to [indiscernible] product innovation. For instance, we designed a Waterdrop Carefree sequence, which may cowl [indiscernible] and the FYP of enterprise sequence of [indiscernible] within the business, receiving excessive recognition from sufferers.
By way of surgical accident insurance coverage, we provide answer throughout 5,000 departments in 32 hospitals, which assist sufferers in opposition to publish hospital restoration. As a know-how firm, we proceed to develop our insurance coverage know-how.
Within the second quarter, we elevated AI investments, enhancing the workforce and upgraded our AI-empowered [indiscernible] chatbot insurance coverage service situation. The chatbot can now talk with customers for greater than 20 minutes. Now we have built-in the chatbot into varied enterprise eventualities, together with operations, gross sales and claims. This integration has successfully accelerating service product and saved human price.
By way of know-how export, we proceed to attempt for excellence with exporting [indiscernible]. We improved the succesful and value and the configurability of each wealth administration and wealth instrument mannequin. Moreover, we collaborated with three new companions to speed up the business transformation in direction of digital intelligence.
This concludes my briefing on the insurance coverage enterprise. So let me hand over to Zetao for an replace on our Medical Crowdfunding and Digital Scientific Trial Answer Enterprise.
Zetao Zhu
Thanks, Shen Peng. As of June 30, 2023, accrued complete of 439 million individuals donated greater than RMB60 billion to over 2.95 million sufferers by way of Waterdrop Medical Crowdfunding platform, each in-house customers and crowdfunding proceed to develop. This quarter, within the operational transparency committee targeted on the authenticity of [indiscernible] in crowdfunding circumstances. Repeatedly improve the governance and transformation of marketing consultant service.
By way of asset authenticity with a purpose to cut back the chance of an inaccurate monetary state of affairs of crowdfunding affected person households, the committee established a particular dwell obtain a greater management which launched the idea of core household and the online value of asset and earnings within the description of affected person’s household monetary state of affairs.
We upgraded a extra correct evaluation of the affordable goal crowdfunding quantity, not solely including utility info and extra convincing content material, but in addition incorporating AI functionality to establish each info with additional enchancment of its controllability, furthermore, this strategy permits for higher communication between the crowdfunding providers and the donors, which exhibits the platform’s dedication to authenticity.
The committee additionally initiated a specialised governance concentrating on crowdfunding consulting habits. We saved strengthening non-compliance conduct, comparable to growing dealing with for valuation implementing a nationwide self-inspection within the panel, combining the power concentrating on larger threat eventualities.
In the meantime, we launched consulting service rules comparable to for principal of service system and by way of service, the energy and proactive service consciousness of marketing consultant and assist them higher addressing affected person wants establishing accordingly service requirements all through all the technique of crowdfunding associated providers, collaboration adopted a superb and [indiscernible].
Moreover we launched a brand new consulting service analysis system primarily based on our person satisfaction. By way of the transformation of offline dedication service we efficiently piloted and expanded service-oriented moderated [indiscernible] leading to a major improve in Web Promoter Scores inside hospitals.
We established a candidate partnership with a number of hospitals in [indiscernible] service oriented consortium to offer help to each the place we cease in area. On one hand, our consulting system utilizing employees with administration tech comparable to [indiscernible] and offering [indiscernible] workflow of merging enabling them to supply sudden medical care to sufferers.
Alternatively, earlier than affected person, the position of marketing consultant extends to a wider vary of exercise like offering normal recommendation throughout hospitalization, providing steerage and a generally decoding and implying for medical insurance coverage coverage of [indiscernible] gear and chartable care initiatives and so forth.
To embody the idea of [indiscernible]. By way of digital scientific trial digital options, the enterprise continued to point out sturdy development leveraging its excellent efficiency functionality, the E-find platform efficiently enrolled over 900 sufferers in Q2, marking a sequential development of 33%, collaborative with 132 prescription drugs and CRO globally, made a rise of 11 companions sequentially.
These figures and core recognition by our purchasers because the platform’s interim aim is sustained to strengthen collaboration with home pharmaceutical whereas thickening the partnership with main multination from digital worldwide. In Q2, the platform launched about 80 new merchandise. Whereas the proportion of tasks with [indiscernible] elevated, the platform additionally achieved cooperation intention with two high 20 MNC prescription drugs, formally kick off the provision course of and count on to launch merchandise in This autumn.
By way of recurring illness, the platform is additional expanded within the state of persistent illness along with ailments like psoriasis, atopic dermatitis and bronchial asthma. It is because of urticaria, hepatitis B, uterine adenomyosis and rheumatoid arthritis. Each guaranteeing product high quality, the platform’s success capabilities proceed to develop. In Q2, the platform CRO enterprise achieved vital progress by signing our [indiscernible] CRO undertaking.
The undertaking offers complete scientific trial service encompassing information perception, medical gross sales, information administration, statistical evaluation, undertaking administration, affected person to the board, affected person to recruitment, affected person administration and their pharmacoeconomic evaluation. This achievement underscores the platform’s visibility for end-to-end operations in scientific trials. In the meantime, the issue is definitely exploring affected person operation, leveraging its on-line operationability partnership in optimizing affected person filtering, affected person schooling, treatment administration and affected person information analysis insights and different operational actions.
Regards to R&D in medical space, we proceed to improve our medical information middle, which is now able to finishing first stage structuring for 10 various kinds of medical supplies including roughly 600 new medical gross sales class and the extent of extracting gross info comparable to for liver most cancers, the system is now able to routinely extracting info as illness staging, scientific staging, TNM staging and different related movies present a powerful information basis for higher customer support. Thanks for listening.
I’ll now hand over to Yang Guang to debate our second quarter monetary efficiency.
Yang Guang
Thanks, Zetao. Whats up, everybody. I’ll now stroll you thru our monetary highlights for the second quarter. Earlier than going into element, please be reminded that every one numbers given right here might be in RMB. And please confer with our earnings launch for future info on our monetary efficiency on each the year-over-year and quarter-over-quarter foundation, respectively.
Within the second quarter, all enterprise traces had been steadily responding demonstrating sturdy enterprise resilience. The Firm’s income was RMB679 million, barely decrease in comparison with RMB711 million in Q2 of 2022, a rise by 12% evaluating to RMB606 million for the Q1 of 2023.
Amongst them, insurance-related earnings was RMB597 million, representing a sequential improve of 11.4%. Crowdfunding service charges had been $44.7 million, representing a sequential improve of 6.4%. Digital scientific trial answer earnings was RMB29.4 million. It has elevated by 28.9% sequentially and achieved a major year-on-year development of 167%.
The Firm’s general premium price and bills have elevated by 32.1% Y-o-Y and decreased by 20.9% Q-o-Q. Working price elevated by 36.2% year-over-year to RMB333 million for Q2 of 2023, in contrast with RMB245 million for the Q2 of 2022, which had been in all probability pushed by two OpEx. RMB74.2 million elevated in succesful outcomes skilled charge and RMB8.9 million improve in price of affected person recruitment consulting charges.
On a quarter-on-quarter foundation, working prices elevated by 34.3% on this quarter, primarily as a consequence of RMB60.9 million elevated in price of referral and repair charges. S&M expense elevated by 41.6% to RMB205 million on this quarter as in contrast with RMB144 million over Q2 of 2022 and elevated by 18% in contrast with RMB173 million for first quarter of 2023. Each Y-o-Y and Q-o-Q improve had been primarily as a result of improve in third-party site visitors channels.
G&A bills had been RMB96 million on this quarter, which stays secure on a quarter-on-quarter foundation. R&D expense elevated by 23.1% to RMB86.7 million year-over-year and elevated by 10.2% on a quarter-on-quarter foundation. Each the Q-o-Q and Y-o-Y improve are primarily as a result of improve in R&D prices of human assets. On this quarter, the Firm launched phase reporting info for the primary time, bringing down our income and profitability into three segments: insurance coverage, core funding and others.
In abstract, the insurance coverage phase had an working revenue of RMB99.8 million, whereas the core funding phase incurred RMB64.1 million working loss and the opposite phase incurred a RMB47.9 million, working loss. It’s value noticing that the Firm’s general revenue is barely pushed by the insurance coverage phase. Adjusted revenue attributed to Waterdrop in Q2 was RMB50.3 million, with GAAP web revenue was RMB21.7 million, and we have now generated GAAP revenue over the previous six quarters.
As of the top of June 2023, the Firm had mixed money, money equivalents and short-term funding of RMB3.4 billion, indicating ample money reserves. Total, the enterprise efficiency in Q2 was secure. Wanting forward, we’ll proceed to concentrate on person worth and sustainable high-quality improvement.
Query-and-Reply Session
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