Waterdrop Inc.

Good morning, this is Mona, the Investor Relations from WaterJobs, and I'm happy to welcome everybody to the WaterJobs Fourth Quarter and Fourth Year 2022 Earnings Call. Please note that you are in a recently moved and today's event is being recorded. Please also note that the discussion today will contain four ilky statements made under the State Harbor Collusion of the U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject to risks and alternatives that may cause actual results to differ materially from our current expectations. Potential risks and alternatives include but are not limited to those outlined in our public findings with SEC. The company does not undertake any obligation to update any forward-looking statements, except as required under ethical law. Also, this call includes discussion of recent non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP. Joining us today on the measuring call are Mr. Shim Hong, our founder, chairman, and CEO. Mr. Yang Guang, co-founder, director, finance VP, and GM of international business. Mr. Zhang Wei, director, GM of insurance technology business. Mr. Zhu Zetao, GM of Crown Funding and Summer Tech Business, Mr. Chen Ruiquan, Board Secretary. And we'll be happy to take your questions in the measuring line at the end of the conference call. Hello, everyone. Thank you for joining our Board Quarter 2022 earnings conference call. Looking back on 2022, the downside risk of global economy and the resurgence of pandemic put tons of pressure on the domestic economy. However, as China made efforts to deepen the stable growth and loosen the provision layers, the domestic economy and the consumer confidence are gradually showing signs of recovery. Under the guidance of policies, the insurance industry has enhanced the trade of high-quality developments and continue to calculate the efficient operation. In the long term, the insurance industry still has great potential since the demand for insurance continues to grow. Meanwhile, the pharmaceutical industry is entering a new age benefit from the acceleration of the clinical trials through business model innovations. Since we have wins, we insisted on pursuing sustainable development by creating value for users. which do not trace business resilience. In the fourth quarter, our revenue continued the profit trade of the last three quarters, increased by 12.5% year-over-year. Our gap net profit reached RMB 126.2 million in the fourth quarter and 608 million for the whole year. We have delivered our commitment on overall profitability for our established business in the year of 2022. As of the end of December, our cash and cash equivalents and short-term investments amounted to RMB 3.7 billion, increasing 3.2% quarter-to-quarter. Even taking into account our repurchase program, we were able to generate a posted cash inflow of RMB 1.15 million in the fourth quarter. Our ample cash reserves and ability to generate posted cash flows put us in a strong position to withstand the ever-changing environment and make future-oriented arrangements. Our businesses are showing positive traits. Specifically, under the pressure of industry adjustments, our water job insurance marketplace continues to contribute net profit and cash flow by enriching our products and improving service capabilities. As a pathfinder and leader of MEDCO's corresponding industry, WorldJob MEDCO's corresponding platform has expanded its market share by transparent operations. It has taken only just one year for eFind's patient platform to transform from a nascent business to an industry leader. In the fourth quarter, the revenue generated from eFind exceeded RMB 22 million, increasing 40 times year-over-year. The annual revenue reached to nearly RMD of $50 million. eFind has become our group's driver. Largely in patient recruitment capability, we are also actively exploring new opportunities in CRO and CSO. As an internet company, we will continue to invest in RMD to build a long-term moat. In the fourth quarter, we further upgraded the intelligent dialogue platform to empower our businesses. We also achieved good results in AI-plus human projects, and we continue to use the underlying technical capabilities to further reduce expenses and increase efficiency. In the fourth quarter, we actively carried out our shared repurchase programs. we repurchased approximately 2.7 million ADIs in total, and we are continuing to execute presently for the one-year extension program. At the end of 2022, we had repurchased almost 8.4 million ADIs from the open market for a total consideration of U.S. B-12.4 million. These don't treat our strong confidence in our corporate values. Meanwhile, we plan to reserve those shares for share incentive plans, which will allow the interest of our employees with our company. Above is a review of our business in the fourth quarter. We have confidence in both the industry and ourselves. Someday, though, we will continue to pursue high-quality growth on the premise of profitability. To achieve our goals, our strategies include First, for insurance business, we will adhere to the digital transformation to expand user coverage and improve sales capability to achieve sustainable product quality. Second, we will increase the investment in pharmaceutical area to be used long-term as a driver. And third, leveraging abundant cash reserves with the M&A and other opportunities around the insurance and pharmaceutical sectors and continue to invest in R&D to empower the whole industry. In the end, I'd like to emphasize that we will continue to cultivate our business and insist on user-centric development to further enhance our industry-leading position. With economic recovery, a supported policy, and abundant cash reserves, our cash flow insurance business and factory and pharmaceutical business continue to be in their own checks, allowing us to face the market trade deliberately. I'll pass to Lan Wei to discuss the performance of the water job insurance business with you both. Thank you, Shunpeng. Hello, everyone. Let me give you an update on our insurance business. With the complex external environment, the resurging epidemic across the country has solved consumer demand, plus the profound adjustment of life and health insurance industry. The growth rate of fourth-year premiums has not improved significantly. Against the backdrop, our fourth-year premiums amounted to around the 1.6 billion. And the insurance-related revenues reached 600 and 11 million. However, since they existed on high-quality developments, our insurance business remained resilient and continued to contribute all the profits. And we also firmly studied the bottom line by driving better ROI and using budgets more efficiently. In the fourth quarter, we leveraged the management of existing users by digging into our business. constantly improves user experience and their value perception. The number of policies per capita increased by 18% quarter-over-quarter, and the decreasing per-champ rate and renewal rate remains at high levels of over 60% and 90%. And the ATL of existing users increased 7% quarter-over-quarter since they continue to improve operational efficiency. We proactively exposed customer acquisition channels on various social media platforms. The overall number of new customers increased by 39%. In WeChat video accounts, the new customers increased by 166% quarter-over-quarter. It has already achieved profitability, laying a solid foundation for folder expansion. In our Zolene live stream, our operators based on the current events and identified users with high willingness to consume and are resulting with follow-up timely to provide financial consulting service for them. Their original redirect to consumer experience and the ability to deliver high-impact content. The number of consumers in the short video platform increased by 371%. In the other hand, we cooperated with the industry players to obtain self-leads. Benefited from our self-conversion capabilities, the APL of a single lead increased by 60%, quarter over quarter. Our online brokerage makes a great switch there in customer acquisition and conversion. By locating target groups, delivering compelling creative content, and reinforcing user acquisition capabilities, our network traffic increased by 36% quarter-of-quarter. Meanwhile, the average lead cost decreased by 17%. As we further improved the account coverage and the content pipelines, the number of accounts increased by 100% quarter-of-quarter. By uplanding the user conversion model, we formed a working mechanism for the insurance planner, and thereby the ATL increased by 140% quarter-of-quarter. In this quarter, the offline brokerage showed a substantial growth, with a year-on-year increase of 229%. We have expanded our business to 11 cities across China, including Beijing and Shanghai. Meanwhile, the similar effects with online brokerage has boosted the transformation of O2OB. In terms of distribution channels, we made progress in optimizing our distribution network with 13 new partners onboarding in each quarter. We focused on the exploration of the insurance planner model in each quarter. We provided users with in-depth one-to-one surveys through enterprise retests. We take a medical insurance product as a trigger to gradually educate users and improve their insurance awareness. At the same time, we expand to annuity insurance and life insurance products. The ATL in December increased by 60% compared with October's operating rate. Regarding our project innovation, in the fourth quarter, They definitely explore user needs and strongly develop many new products with insurance. For instance, they co-designed with a world health insurance launch a customized product against leukemia recurrence for the patients to meet their protection needs. Another example is that we launched a post-effective accident insurance. The total premium has exceeded 10 million RMB and it has become a benchmark product in the market. In addition, we have further upgraded new medical insurance products and made explorations in the early screening of cancers and cardiovascular disease. We conclude this partnership with two new insurance in this quarter and expanding the breadth and depth of cooperation with certain insurance, such as Taekwondo Insurance and Sosa United. As a technology company, we sustained our investment in AI-driven innovation, laying a solid ground for our medium and long-term growth. For example, we released a robot configuration platform under a new architecture to enable our robots to realize a faster self-training progress in different scenarios, optimize our intelligence cells with matching systems, and include more types of service and workplaces. We used AI to help self-team identify potential customers in WeChat, and thereby the premium boosted by hundreds of thousands. We also strengthened our risk control capabilities, applying AI to improve both operational efficiency and user experience, which significantly reduced the conflict rate. we empowered industry with our technology. In Q4, we successfully integrated and exported the selected products of our industry-leading data system. At the end of December, we exported our thin-screen interactive technology to the industry customers, which simplified the sales process and optimized their ability to communicate with customers. This concludes my briefing on our insurance products. So let me head over to Google Talk for an update on our medical fund funding and patient recruitment business. As of the end of Q4, a cumulative total of $426 million helped exceeding 2.7 million patients based around $57 billion on our platform. In this quarter, the Operational Transparency Committee made further improvements. For instance, we released a monthly bill that includes the overview and breakdown of the money raised in our platform, which marks that not only can we achieve the transparency of a single campaign, but also the transparency of the whole fundraising platform. The billing system includes the total number of campaigns details of funds raised, refunded, and withdrew. It also shows the cash flows from the donors to the fundraisers. In addition, the details list of monthly closed cases and a useful search tool are provided for the public oversight and monitoring. Besides, we can also fully disclosure the case review procedure and its corresponding results through a way board To be specific, when a campaign was initiated, the strong cases will be identified and intercepted under certain scenarios, including concerning financial conditions, contradicting personal information, using funds to buy a house or car, used to be listed on our blackface or other behaviors that do not comply with our fundraising rules. On the other hand, During the fundraising process, any campaigns related to the needs of appropriation of funds, a bank account, and medical bills will also be identified and accepted. We will also publicize the rationale and decisions to deal with the controversial cases on the various scenarios, further enhancing the transparency under the public oversight. In the fourth quarter, the development of clinical trials was impacted by the pandemic in many places around the country, and therefore the close life of many clinical trials was hindered. Leveraging the advantage of our wide coverage across the country and capabilities in quickly and accurately recruiting patients, the eFive patient platform involved nearly 700 patients to over 200 clinical trials. significantly accelerated the TRIO progress of our partners. Thanks to our industry's reputation and excellence project performance, the number of clinical TRIO programs continues to grow, with nearly 18 new programs launched in this quarter. As the end of Q4, we already collaborated with over 100 pharmaceutical companies, In the meantime, we also keep those relations with our regular customers and continue to expand this group of cooperation. For example, e-Finds cooperated with Beijing for the first time in 2022 to participate in the patient recruitment for a certain tumor clinical trial, which required patients to have qualifying factors, such as genetic mutation, leveraging our normal patient pool and digital capabilities, reused medications in a very short time, which effectively promoting the trial programs that have been highly recognized. As a result of this, Beijing and Yifan continue to deepen cooperation with five new projects launched in this quarter. At present, we are also promoting cooperation with a number of world-leading pharmaceutical companies. and is expected to complete the supplier review in 2023 and formally launch cooperation. In addition, we also upgraded the ecosystem composed by the pharmaceutical companies, doctors, and patients, and exposed new directions of healthcare digitalization, relocation operations, and other potential business directions. we invested in R&D in the medical field and the role. Based from the consulting upgrades, our medical algorithm platform covers almost 100% of diseases and can ultimately extract it and identify criteria, medical intentions, and medicine information, which improves the operational efficiency. In addition, the algorithm can be used to increase the one-time uploads success rate of compound claims, which demonstrates the synergy effects between our pharmaceutical business and insurance business. I now hand over to Yang Guang to discuss our fourth quarter financial performance. Thank you, Zeta. Hello, everyone. I don't know what is our financial highlight for this quarter and full year of 2022. Before I go into details on the financial performance, please be reminded that all numbers quoted here will be in RMB. And please refer to our earnings release for detailed information on our comparative financial performance on both the yearly year and quarter-to-quarter basis, respectively. Despite the changing external environment, we insisted on the high-quality development. Our net operating revenue increased by 12.5% year-over-year to $639.5 million, which primarily due to the increase of insurance-related income, transforming service space, and digital financial solution income. The operational cost and expenses decreased by 10.5% year-over-year and 5.2% quarter-to-quarter, amounting to $606.6 million, driven by the financial decline taken since the quarter of 2021. To break it down, operating costs were $278.6 million, up by roughly 41% year-over-year, mainly due to the increase in professional and also customer service base of 51.2 million, and the recording of confounding related service base of roughly 57 million from sales and marketing expenses to operating costs, and they started to generating confounding service base since April 2022. and partially offset by around $41 million decrease in personnel costs for our consultants and insurance agents teams. On a quarterly basis, operating costs increased by 18.4% as a result of the professional and also customer service base decrease by around $25 million. Sales and marketing expenses decreased by 42.8% year-on-year to $137.8 million, which was primarily due to a $36 million decrease in marketing expenses to third-party traffic channels, and exactly $80 million decreases in off-site sales and marketing services to third-party traffic. On a quarter-to-quarter basis, our self-advocacy expenses almost remain unchanged. Our GMA expenses decreased by 20.7% year-over-year to $118.6 million due to the combined impact of a decrease of $39 million in impairment loans and partially offset by an increase around 50 million allowance for Zalco accounts and a 7.7 million decrease in personal costs. On a quarter-to-quarter basis, it increased by 44.5%, primarily due to the increase in allowance for Zalco accounts, professional services, as well as the share-based composition expenses. In this quarter, the RMD expenses decreased by 21.2% year-over-year and 8.5% quarter-over-quarter to 71.7 million, which was primarily due to the decrease in RMD personnel in Q4. We reported a non-GAAP profit of 159.7 million and a GAAP profit of 126.2 million. compared with an adjustment net profit of $5.9 million in the period of 2021. The profits we have generated over the past five quarters illustrates the determination and achievements of cost-to-supply and profit enhancement. As of December 30, 2022, our cash and cash improvements and short-term investments increased 3.2% quarter-to-quarter, to $3.7 billion as we continue to generate positive operating cash flow. In conclusion, we have committed our financial guidance of achieving a non-debt profit in the year of 2022. Going forward, we will continue our efforts in cultivating our business, enhancing our revenue quality, and adapting cost reduction. Our competence is underscored by the resilient business, ongoing momentum, and most importantly, our team's ongoing commitment to deliver best-in-class service to our customers. And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.