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spk00: Good morning, everyone. This is Li Hongjun from WaterDrop Investor Relationships. It's my pleasure to welcome everyone to WaterDrop's first quarter 2023 earnings conference call. I'll put in the page in relationally mode in our English line. As a reminder, today's conference call is being recorded. Please note that the discussion today will contain forward-looking statements made under the Steve Harper provisions of U.S. private securities. and the Litigation Reform Act of 1995. Forward-looking statements are subject to risk and uncertainty that may cause accurate results to differ materially from our current expectations. Potential risk and uncertainty includes but not limited to those outlined in our public findings with the SEC. The company does not undertake any obligation to update any forward-looking statement, except as required in the applicable law. Also, the call includes discussion of certain Nangap matters. Please refer to our earnings release for reconciliation between Nangap and GAAP. Joining us today on the call are Mr. Shen Peng, our founder, chairman, and CEO. Mr. Yang Guang, co-founder, director, finance VP, and GM of international business. Mr. Yang Wei, director, GM of insurance technology business. Mr. Zhu Zetao, GM of crowdfunding and pharma tax business. Mr. Chen Ruichen, board secretary. And we will be happy to take some of the questions in the minute line at the end of the conference call. Hello, everyone. This is Shen Peng. Thank you for joining our first quarter 2023 earnings conference call. After the adjustment of the pandemic control policies, there was a peak period of domestic infection in January, combined with the impact of the spring festival holiday, which briefly brought accidental headwinds to the industry. However, as the impact of the pandemic and holiday subsides, the domestic macro economy shows signs of recovery. and the overall trend of the insurance and pharmaceutical industry is graduating, picking up. In the long term, as the insurance customer base graduates become younger and the distribution and sales become more separated, the life insurance industry is significantly shifting towards online and intermediary direction. Additionally, as a hospital, our patient department goes back to normal. Claims and trial projects continue to operate. The overall demand for new drug and research and development will further increase. In first quarter of 2023, the company continues to focus on creating value for our users and keep pursuing healthy development. The business performance remains robust with the company's revenue reaching $606 million in the first quarter, carrying over the upward trend for the last whole year. The gap processed in the first quarter with $49.7 million. Demand strengthening the sustainable and high-quality development of the company's operations. With sustained positive net profit, the company maintains ample cash reserves. As of the end of March, The company held a total of $3.6 billion in cash, cash equivalents, and short-term investments. The abundant cash reserves help the company to face uncertain environments with more confidence and support long-term planning and layout for the future growth. All of our business models achieved strong performance in the first quarter, continuously consolidating our leading position and influence in the industry. First of all, Waterdrop Insurance Marketplace adhered to promoting insurance product diversification and innovation. Meanwhile, we moderately increased investments in third-party traffic channels in the first quarter, and we consistently optimized our existing customer operations. Thanks to the efforts of our colleagues, there was a quarter-on-quarter growth in FYP. And our water drop insurance business continues to contribute stable net profits to the company. In addition, our water drop medical co-funding platform continuously enhanced service and risk control capabilities. We actively collaborate with various stakeholders, such as judicial departments, hospitals, and industry, to crack down on dishonest fundraising activities. This initiative was highly recognized by the industry. In an integrity-based 315 data, the company has honored as an integrity commitment enterprise for the consumer new force in 2023. Lastly, in terms of the digital clinical trial solution business, due to our excellent performance in contract fulfillment, The eFind patient platform gets recognition from domestic and international partners. We continue to expand the range of recruited disease types, thereby accelerating drug development for pharmaceutical companies. We will keep exploring innovative opportunities in the field of CRO and pharmaceuticals. Along with business development, the company continues to invest in research and development. In the first quarter, the company closely follows the development in AI industry. We further upgraded AI-empowered dialogue chatbots and relevancy technologies. As a result, we improved our marketing capability, serviceability, and risk control competence, thus facilitating and improving our business efficiency. The company also actively explored cloud-native technologies, building a solid foundation for the export of our technology. As of the end of May 2023, the company has cumulatively repurchased 24.9 million EDS shares on the open market, with cash for a total consideration of approximately 61.2 million U.S. dollars. we will continue to execute the one-year extension program announced in September 2022. This demonstrates the company's firm confidence in our own value and long-term sustainable development. Meanwhile, we plan to reserve the shares for ESOP, which will further motivate our employees. Above is a review of our business in the first quarter, and we'll stay fully confident in the industry and our own development. Down the road, we will continue to pursue high-quality growth on the premise of probability. To achieve our goals, our strategies include, firstly, for the mature insurance business, we will insist on being user-centric to deliver more professional online service, improve sales capability, and achieve probability at scale. Secondly, we will actively explore the rapidly-growing pharmaceutical business with a goal to rapidly penetrate domestic and international pharmaceutical markets and build new growth engines in the long run. Thirdly, leveraging our abundant cash reserves, we will seek partnership and merger and acquisition opportunities around the insurance and pharmaceutical sectors Lastly, we will continue to invest in R&D and seek to empower the industry. In conclusion, the company will continue to prioritize user centricity and increase the value of our users. We will further strengthen our existing business advantage while maintaining an entrepreneurial mindset to pursue higher quality growth and business innovation. We will continually bring insurance and healthcare service to billions through technology. I will pass to Renwei to discuss the performance of insurance business in this quarter. Thank you, Shen Tong. Hello, everyone. Let me give you an update on our insurance business. In first quarter, the life insurance market showed some sudden growth, and there was a noticeable increase in precautionary savings amounts. In this setting, we continue to enhance operational efficiency and business health, optimize operations for existing customers, and actively explore new channels while adhering to product innovation. This leaves a solid foundation for the long-term sustainable growth of our business. For the first quarter of 2023, the first-year premiums generated through our water drop insurance marketplace amount to $1,692 million. an increase of 6.3% quarter-over-quarter. Our insurance-related income amounts to $536 million. In first quarter, leveraging algorithms, our short-term insurance continued to improve in product offering, channel efficiency, and content innovation. In order to better serve our users, we offered differentiated user service to a wide range of users and steadily enhanced business engagement. Furthermore, we upgraded service capability in policy renewal, improved user experience and value perception, and saw a further improvement in the short-term insurance policy renewal rate. Overall, FYP of our short-term insurance increased 6.4% quarter by quarter. As for long-term insurance, we focused on user value and boldly innovated in user service. leading to a further increase in insurance premiums contributed by enterprise free checks. The LPG maintains industry-leading capabilities in fine business operations and productivity per capita. We invest in new talent for improving and performing branches. As a result, there was a 27% increase in productivity per capita, and the number of policies per capita increased by 14% quarter over quarter. while achieving rapid growth in personal productivity. The company maintains strict control over user service and policy quality, resulting in a 2% quarterly increase in the first-year renewal rate of our long-term insurance policies. In terms of the user acquisition, based on our existing strengths, we further expanded our capability and saw a 3% quarterly increase in the overall number of new users, In particular, we kept strengthening our end-to-end operational ability through video channel customer acquisition. And it resulted in a 111% increase in insurance premiums compared to the previous quarter. In the first quarter of 2023, Waterdrop continued to explore new brokerage channels, such as online brokerage, offline brokerage, and insurance planner to facilitate sustainable systems growth. For the perspective of meeting user value, our online brokerage kept enriching its product portfolio, resulting in a quarter-on-quarter increase of 83% in the number of reserved products across all insurance categories. With precise user targeting ability, the cost of customer acquisition further decreased with an 18% quarter-on-quarter reduction in cost per day. Our service capability significantly improved with a 396% increase in APL, which means average premium per lead in March compared to the last quarter. And there is a 7.9% increase in standard premium per capita from January to March. In this quarter, the new business premiums for offline brokerage increased by 48.8% year-on-year. Premiums by active broker increased by 21.9%, and the number of policy per active broker increased by 22.5% on quarter-on-quarter basis. As offline brokerage business march forward, we emphasize organizational structure, which improves business quality and a refined brokerage model. In the first quarter, we initiated a pilot project to promote the enterprise WeChat insurance planner model in multiple cities, driving the upgrade of service quality. By optimizing the service key for insurance planners, APL in March increased by 70% compared to December 2022. At the same time, the company increased talent investment and a control ROI which lead to 182% increase in standard premiums for planners from January to March. In first quarter, Waterdrop Insurance Marketplace continued to enrich its product offerings and their tailored products targeting specific user groups. For children's insurance products, we customized outpatient medical insurance for children, which covers outpatient, inpatient, burns, vaccination, correction, dental repairs, and expanded coverage for childhood leukemia. This product expanded to cover items that parents are more concerned about and provide more comprehensive protection. Targeting analyzing, we launched a licensed myopia prevention insurance. Combining protection and myopia prevention-related health management service, we cooperate with Beijing Tongan Hospital, and United Family Health Care on this featured product. To address the insurance needs of the elderly population in City 5 and abroad, we introduced exclusive tools like CMI long-term care insurance and malignant tumor insurance. Furthermore, we have achieved innovative programs in insurance for customers with pre-existing conditions. In the scenario-based insurance category, We successfully launched a surgery-carried insurance and achieved broke through in the in-hospital operation model. The FYP of this product has achieved a consistent growth of 100 and more, or three consecutive months, while maintaining a low clean rate for industry living. The premium of the industry-first leukemia relapse insurance exceeded $1 million in FYP in Q1. In addition, we are developing long-term critical illness insurance for chronic kidney disease and comprehensive cancer relapse insurance for virus high-incident cancers. These products will be introduced to the market to benefit more individuals with pre-existing conditions. As a technology company, we sustain our R&D investment in insurance business, laying solid ground for our medium and long-term growth. Firstly, we continuously emphasize our staff use R&D. For example, by keeping up with the latest achievements in AI, we consistently upgrade and integrate our AI-empowered dialogue chatbot, which can now predict a 10-minute call immediately, even surpassing the service efficiency of junior staff. By developing dedicated chatbots in various business scenarios, our employees can further enhance their service and capability. to better serve our clients. Additionally, we utilize AI capabilities to deepen our procession operations in intelligence marketing and private domain operations. In the intelligence marketing domain, we have built a stable and efficient lead matching system, empower AI with more decision-making authority in lead matching and increasing the API ratio by almost 12%. An important model of Italian marketing, our private domain operation via enterprise free check, we have achieved a continuous optimization and user retention improvement through technology iterated. While emphasizing on self-use R&D, we also explore the export of our technology capability to empowered industry partners. In the first quarter, we integrated and upgraded our self-management and same-screen interactive system, significantly improving the efficiency of partner integrity. We have made a significant progress in self-management of tools, data centers, and other functional models, in order to provide a comprehensive solution for our partners. This concludes my briefing on insurance business. Let me head over to the top for an update on our medical core funding and digital clinic trial solution business. As of the NFQ1, accumulated total of 432 million donors help exceeding 2.6 million patients. We have around 38.4 billion on our medical core funding platform. The overall number of users and fundraising represents an upward trend. In this quarter, the Operational Transparency Committee of Fundarizing Targets and the Regulation of Consultant Service, Optimizing and Improving Operational Capabilities. Regarding the determination of reasonableness of fundarizing targets, on one hand, the committee strengthens technology abilities to identify medical materials. allowing for more accurate filtering of duplicating materials and Photoshop information. On the other hand, we optimized medical risk control stress for variable scenarios, including rare disease and complex treatment plans, achieving intelligent auditing of fundraising targets. Additionally, in the initial review process, we enhanced medical risk control audits, especially for fundraising target amounts. timely and accurately assess and eliminate cases with unreasonable target amount to enhance the regulation of consultant service. The operational transparency committee established a mystery visitor mechanism. By adopting a patient perspective, we delve into the actual service process of consultant to identify issues and conduct nationwide internal inspection of consulting. This way ensures a slow process for standard setting, implementation, to effective assessment, significantly reducing irregular behavior during service and enhancing service level of our fundraising consultants. We're continuously improving our own service and risk control stability. We actually collaborate with various stakeholders, including judicial departments, hospitals, and industries, to crack down on dishonest fundraising activities, ensuring that every single donation is used properly. This year, as an Integrity Banking 315 dollar, Waterjob was honored as Consumer New Force Integrity Commitment Enterprise for 2023. As a medical crowdfunding platform, Waterjob has always maintained an open and transparent attitude providing assistance to extremely needy patients and delivering more value to society while actively fulfilling our social responsibility. This quarter, Waterdrop also received the 2022 Public Welfare Enterprise Award and was included in the list of 2022 Most Socially Responsible Enterprises. The company will continue to explore participation in critical illness assistance and the construction of a multi-level medical security system. In terms of the data clinical trial solution business, as the impact of the pandemic weakened in the first quarter, the business is gradually stabilizing and it shows a growth trend. In the first quarter, the platform successfully enrolled over 700 patients. effect of pandemic and holiday graduate subsides. The platform saw significant salary in clinical trial enrollment with over 350 patients enrolled in March, greatly speeding up the progress of our partner's clinical trial. As our industry of the season starts, our eFind patient platform has attracted leading domestic and international medical pharmaceuticals to establish partnerships and continuously deepen the scope of collaboration. In the first quarter, we collaborate over 120 pharmaceutical companies and CROs. Based on our outstanding track record in Q4 2022, the platform deepens strategy partnership with leading domestic pharmaceutical companies, such as CTGQ and Beijing, and will keep expanding the scope of collaboration. The platform has also established partnership with several top international pharmaceutical companies and will officially kick off a few projects in the second quarter. In the first quarter, the eFind platform launched over 70 new projects, continuing the platform's leading recruitment advantage in the field of oncology. Meanwhile, the platform consciously expanded into more disease, leveraging our brand-influenced patient population and an extensive patient community. We expanded recruitment for chronic disease and funded multiple projects. In the first quarter, we added psoriasis, atopic dermatitis, asthma, and other chronic disease. In the field of psoriasis, over 100 patients were enrolled in March. Both efficiency and quality are industry-leading positions. In the first quarter, the company continues to invest in research and development in the medical field. The technologies for medical materials are continuously upgraded and can support the first level structuring of discharge records, admission records, discharge certificates, discharge summaries, and medical records, among others. Based on that, we have completed the extraction of drug information for tens of thousands of liver cancer patients. With the help of relevant technology, the first pass rate of material audits increased by 2%, leading to recruitment consulting savings by nearly half of one day per day, half an hour per day, resulting in continuous business efficiency improvement. Thank you. I will now hand over to Yang Guang to discuss our first quarter financial performance. Thank you, Zitao. Hello, everyone, and we now walk you through our financial headlines for the first quarter. Before I go into detail on the financial performance, please be reminded that all numbers called here will be R&B, and please refer to our earnings release for detailed information on our financial performance on both year-over-year and quarter-over-quarter basis. In the first quarter, the company adhered to a high-quality development model. The company's revenue was $6. $106 million, slightly lower compared to $649 million in the same period of 2002. Among them, insurance-related income was $536 million, representing a year-on-year decrease of 14.6%. Corresponding service fees were $42 million, comparing to nil in the same period of the year. Digital critical trial solution income was $22.8 million, achieving a significant year-on-year growth of 167%. The company's overall operating costs and events have increased by 12% YOY and decreased by 1.8% QOQ. Operating costs increased by 60% year-on-year to $248 million for the first quarter of 2003. Comparing with $155 million in the first quarter of 2022, which was primarily driven by two effects. Firstly, there was a $29.1 million increase in professional and consulting customer service fee. Secondly, an increase of $61.5 million due to recording the corresponding consulting team costs and operating costs rather than sales and marketing expense. as we started to generate co-founding services since April 2022. Quarter-over-quarter basis. Operating cost is decreased by 11%, primarily due to a decrease of 25.9 million in professional and outsourcing customer service debt. Sales and marketing expense decreased by 15.1% year-over-year to $173 million for the first quarter of 2003, compared with $204 million for the same quarter of 2002. The decrease was mainly due to the crowdfunding-related direct costs recorded from sales and marketing expense to operating costs, as mentioned before. On a quarter-over-quarter basis, There has been a $29.4 million increase in sales and marketing expense as third-party advertising expense for traffic channels in the quarter increased. General and admin expense decreased by 6.1% year-on-year to $95.8 million, primarily due to a decrease of $16.3 million allowance for thoughtful accounts. On a quarter-over-quarter basis, general and mean expense decreased by 19.2% in the first quarter of 2023, mainly due to $19.7 million decrease on allowance for doubtful accounts. Research and development expense increased by 11.2% to $78.7 million year-over-year and increased by 9.8% on a quarter-over-quarter basis, The YOY and QOQ increase are both mainly due to increase in R&D cost of human resources and share-based comprehensive expenses. Adjustment profit attribute to water drop for the first quarter of 2023 was $96.4 million, and the gap net profit was $49.7 million. And we have generated gap profit over past five quarters As of the end of March 2023, the company has combined cash and cash equivalent and short-term investment of $3.6 billion, indicating sufficient cash reserves. Overall, the business performance in the first quarter was stable. Looking ahead, we will continue to focus on users' value and sustainable high-quality development. And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time. The conference is now concluded. We thank you for attending today's presentation, and you may now disconnect.
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