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spk00: Good morning, everyone. This is Nipun Jain from WaterDrop Investor Relationships. It's my pleasure to welcome everyone to WaterDrop's second quarter 2023 earnings conference call. Also, there is an inaudible mode in our English line. As a reminder, today's conference call is being recorded. Please note that discussion today will contain forward-looking statements made under the safe harbor provision of U.S. Guard and Security and the Litigation Reform Act of 1995. Forward-looking statements are subject to risk and uncertainty that may cause actual results to differ materially from our current expectations. Preliminary risk and uncertainty includes but not limited to those outlined in our public filing with the SEC. The company does not undertake any obligation to update any forward-looking statement if found as required in the applicable law. Also, this call includes discussion of certain NANFAC methods. Please refer to our earnings release for consideration to NANDAP and NGAP. Joining us today on the call are Mr. Chen Peng, our founder, chairman, and CEO, Mr. Yang Guang, co-founder, director, finance VP, and GM of the international business, Mr. Zhou Zitao, GM of crowdfunding and pharma tax business, Mr. Chen Ruichen, board secretary, and I would be happy to take some of the questions in the memory line at the end of the conference call. Hello, everyone. This is Shun Peng. Thank you for joining our second quarter 2013 conference call. This is the second quarter, Insurance and Pharmaceutical Industry. With the gradual enforcement of regulations, transparency and standardization have significantly improved, effectively enhancing user experience and satisfaction. This has also led compliance and user endurance companies to embrace new growth opportunities. In this setting, the companies proactively contemplate regulatory trends, respond actively to market demands, continually innovate products, and optimize service, consolidating a leading edge in niche sectors. Regardless of the challenging external environments, The management firmly convinced adhering to long-term values and maintaining a user-centric approach will secure greater market space. In the second quarter of 2023, the company continued to focus on creating value for our users and keep pursuing healthy development. The financial performance rate went up, with our revenue reaching $679 million. Carrying over the upward trend for the last five quarters, the debt profit reached $21.7 million, demonstrating the sustainable and high-quality development of the company's operations. With the same positive net profit, the company maintains ample cash reserves as of the end of June. The company held a total of $3.4 billion in cash cash approval and short-term investments. Redundant cash reserves help the company to fit in certain environments with more confidence and support long-term planning and layout for the future of growth. All of our business models achieve strong performance in the future and consider it in our leading position and influence in the industry. First of all, what is our insurance market rate in a centriatic and user-centric and it has different fatalities. While exploring diversified customer acquisition channels, we also give them product innovation, thanks to the efforts of our colleagues. Those FIP and revenues make the crucial growth, and they continue to contribute single max profit to the company. In terms of 3.5 trillion solution business, due to our excellent performance, the eFind platform gains recognition from both domestic and international partners. We continue to expand disease types and accelerate drug development for pharmaceuticals. And we also made significant progress in CRO. In G2, G2 Coins' highest solution income was $29.4 million and achieving a significant year-on-year growth of 167%. In addition, by iterating outcome capabilities and risk management mechanisms, our Woodruff medical core funding platform firmly adhered to transparent operations and live up to every ounce of compassion. Meanwhile, we enhance service quality, propel a service-oriented consulting model, and embody the principle of users first, service foremost. Along with business development, the company continues to invest in research and development. In future, the company continues to upgrade technologies like intelligence channels, deploying AI in various sectors, including operations, stealth, and planning. which strongly accelerated operational efficiency. And the company persists in exporting technology to empower the industry. In the complex and ever-changing macro environment, the company confronts challenges while actively fulfilling CSR, As of June 30, 2023, the Writers of Charity Program has collaborated with about 110 public charitable organizations to carry out projects in serious illness assistance, emergency disaster relief, and education support. The program has raised about $1.3 billion in risk of contribution from more than 69 million donors. We also continue to find ESG initiatives and strive to achieve mutual sustainable development between the company and the society. We benchmark domestic and international ESG standards to establish a top-down governance framework and publish the 2022 ESG report. The report summarizes our company's management and performance in areas like company governance, participation in multi-level medical support systems, technology innovations, green and low carbon initiatives and public welfare. This demonstrates the company's commitment to high quality and sustainable development. In terms of share repurchase, as of the end of August, 2023, the company has cumulatively repurchased 37.5 million shares in the open market, with cash for a total consideration of approximately 86.1 million US dollars. We also want to announce the expansion of the repurchase plan, which has received approval from all of the directors. Within the next two months, the company will repurchase shares in the open market for a month now exceeding $15 million. This decision is based on the company's strong confidence in our own value and long-term sustainable development. Meanwhile, this share repurchase will be used for info, which will further cultivate our employees. The above is a brief review of our business performance in Q2. Although facing a challenging macro-environment, we are faithfully confident in ourselves and the industry. Looking forward to the latter half of this year, our strategies include, firstly, driven by online and digital transformation, the insurance system will continue to be patriotic, striving to achieve long-term healthy and stable development. Meanwhile, it will continue to enhance team efficiency, further refine the business foundation, and provide users with professional and software service. Secondly, the corresponding business will continue to adhere to user first and iterating service models, giving the industry towards high-quality development. We will also adhere to transparent operations and implement strict risk management while actively fulfilling CSR. Thirdly, leveraging big data, the computable business will continue to increase industry penetration globally and actively explore new models in order to construct a new long-term growth engine. Fourthly, the company will make use of its Envo Cash Reserve and take cooperation and investment opportunities around insurance and the healthcare sector. Last but not least, the company will accelerate its technology empowerment and enhance AI ability to build core technology competitiveness, thereby supporting the implementation of long-term strategies and empowering the industry. The company will make use of its Amble Cash Reserve and state cooperation and invest in opportunity around insurance and the healthcare sector. In conclusion, the company will continue to develop long-term landfiles, keep calibrating user value, strengthening their sustainability and organic growth, and constantly expanding business boundaries. We'll continue to bring insurance and healthcare-assessed service to buildings through technology. And now let me give you an update on our insurance business. In the second quarter, in order to enhance service experience and business healthness, The company committed to user-centric and high-quality development and continued to explore new service models. During Q2, we achieved $219.7 million in good year premiums and marked a 30% sequential growth. Insurance-related revenue reached $597 million, reflecting 11% Q2 growth. Short-term insurance achieved a FIP of 1.6 billion, marking a 30% sequential growth. On one hand, the company further developed our content-based user acquisition capability. In Q2, We increased our brand's exposure to supply innovation and spreading high-quality content across multiple platforms, leading to a sequential growth in the number of new users. On the other hand, we've kept elevating our existing customer base, leveraging AI ability. The company continues to increase the quality of renewal rates, leading to over 90% of short-term insurance renewal rates. Long-term insurance achieved a FYP of $590 million, representing a 29% incremental growth. The long-term insurance brokerage income increased by 38% incrementally. As long-term insurance products continue to expand, the proportion of life insurance premiums within the long-term segment has risen to 37%. During this quarter, the scale and productivity of the capital of long-term insurance means grows incrementally. The company's company-adapted service model focuses on current domain scenarios and intensifies user education, which leads to a 33% of FYP from private domain operations. The company also strengthens its quality control over policy issuance, leading to a substantial improvement in the first-year retention rate for marketing products. In Q2, what about continuing to explore new brokerage channels to facilitate a sustainable business growth? For our online brokerage channel, FYP Experience, a 113% screenshot growth is a declining interest rate. The company developed a new brand, New Insurance, which focuses on single insurance and live insurance to younger users in the first and second tier cities. Sequentially, the number of users for scaling insurance grows by 206% thanks to high quality content and segment marketing. The cost per lead decreased by 25%. Moreover, the team improved their service process and now can control user first-time response within 20 minutes. This leads to a Q2 increase of 49% in productivity per lead and 30% in productivity per capita. In terms of offline agents, As the market rebounded and the team matured, we achieved a remarkable 206% ROI growth in FIP. We continued to enhance product offering and operational capabilities. We further upgraded our BD system, applying functional models and optimizing the experience for both agents and clients. We elevated recruitment standards and talent in the development and actively explored agent IP. The average productivity per active agent increased by 201% YOY. The average number of long-term insurance policy per active agent increased by 48% YOY. During the second quarter, the insurance marketplace continued to enrich its product offerings and tailored products targeting the business users' work. For individuals interested in long-term production and innovation Medical treatments abroad will launch the Blue Ocean Lifetime Health Insurance. This policy allows users to take ASCO over six medical services at an affordable price and quickly provide an option for users to transfer from short-term medical insurance directly to a 20-year long-term medical insurance, thereby maximizing user coverage. Targeting elderly, we introduced the self-help burden, too. This product is the first in China to cover 10 common serious units among the elderly, including malignant tumors. It was listed in the annual product innovation list by the 2023 China Insurance Industry and Food Ranking. For staff health interviews, we continued to iterate our Blue Ocean series, which is the first domestic health insurance rating healthcare could be tolerated. In Q2, this product series achieve RFIP over 100 million. Additionally, we actively explore multi-channel cells of maternity and infant insurance and insurance covering medication in outpatient and emergency. We saw a sequential increase in RFIP. In terms of users with pre-existing conditions, we continue to really product support innovation For example, we designed a water drop care-free series, which can cover cancer recurrence, and the FIP of the existing series about the related cancer, and a recruitment opinion, ranked first in the industry, receiving high recognition from patients. In terms of surgical accident insurance, we offered a solution across 1,000 departments in 32 hospitals, which help patients against post-operative risk. As a technology company, we continue to develop our insurance technology. In the second quarter, we increased AI investment, enhancing the team, and upgraded our AI-empowered dialogue chatbot into the basic short-term insurance service scenario. The chatbot can now communicate with users for more than 20 minutes. We have integrated the chatbot into various business scenarios, including operations, sales, and claims. These integrations have effectively accelerated service programs and saved human costs. In terms of technology exports, we continue to strive for excellence with exporting comprehensive solutions. We improve the usable and usability, and the configurability of both self-management and self-tool model. Additionally, we collaborated with three new partners to accelerate the industry transformation towards digital intelligence. This concludes my briefing on the insurance business. So let me hand it over to Kuzo Tao for an update on our medical funding and digital clinical trial installation business. Thank you, Cheng Tong. As of June 30, 2023, a cumulative total of 439 million people donated more than $60 billion to over 2.95 million patients through WaterJob Medical crowdfunding platform. Both the number of users and crowdfunding amount continue to grow. This quarter, WaterJob Operational Transparency Committee focused on the authenticity of asset claims in crowdfunding cases, continuously enhanced the governance and transformation of consulting service. In terms of asset authenticity, in order to reduce the risk of an inaccurate financial situation of crowdfunding patient families, the committee established a specialized chief of authenticity control, which introduced the concept of crowdfunding, and the net worth of asset-having income in the description of patient-family financial situation. We upgraded a more accurate assessment of the reasonable target crowdfunding amount, not only adding application information and more convincing content, but also incorporating AI capabilities to identify false information, bringing a further improvement of its controllability. Moreover, This approach allows for better communication between the court-funding cases and the donors, which shows the platform's commitment to authenticity. The committee also initiated a specialized governance targeting court-funding consultant behavior, which has strengthening noncompliance conduct, such as increasing penalty for violations, implementing a nationwide self-inspection mechanism, combining AI abilities targeting high-risk scenarios. Meanwhile, we introduce consultant service principles, such as four principles of service systems and the agents of service, so sensing proactive service awareness of consultants, and help them better addressing patient needs, establishing accordingly service standards throughout the entire process of co-signing, initiating, cooperation, fund withdrawal, and fund utilization, Additionally, we introduced a new consulting service evaluation system based on our user satisfaction. In terms of the transformation of offline consulting service, we successfully piloted an expanded service-oriented consultant model in Changsha and Wuhan, resulting in a significant increase in net promoter scores within hospitals. We established a strategic partnership with several local hospitals in New Orleans, ...oriented consultant to provide assistance to both nursing staff and patients. On one hand, our consultant assists in nursing staff with administration tasks, such as handling team reminders, organization wish lists, and providing emotional support to learn the daily workload of nursing staff, enabling them to offer better medical care to patients. On the other hand, For certain patients, the role of consultant extends to a wider range of activities, like providing general advice during hospitalization, offering guidance and accompanies, interpreting and applying for medical insurance policies, applying for assistance and charitable care initiatives, and so on, to embody the concept of do the first, serve the most. In terms of physical and social isolation, The business continued to show strong growth, leveraging its outstanding performance capability to implement platforms that separately enrolled over 900 patients in Q2. Marketing was a crucial growth of 33%. We collaborated with 132 pharmaceuticals and CROs globally, made an increase of 11 partners sequentially. These figures and scores of recognition by our clients As the platform's influence grows, it continues to strengthen collaboration with the MAP55 pharmaceuticals while deepening the partnership with leading multinational pharmaceuticals worldwide. In Q2, the platform launched about 80 new projects. While the proportion of projects with MNC increased, The platform also achieved cooperation intentions with two top 20 MNC pharmaceuticals, officially kicked off the supply process and effectively launched products in Q4. In terms of recruiting disease, the platform further expanded in the field of chronic disease. In addition to diseases like psoriasis, atopic dermatitis, and asthma, it extended to early carrier hepatitis B, uterine endomyosis, and rheumatoid arthritis. While ensuring project quality, the platform's fulfillment capabilities continue to grow. In Q2, the platform's CRO business achieved significant progress by signing a groundbreaking full-process CRO project. The project provides comprehensive clinical trial services income passing data insights, medical affairs, data management, statistical analysis, project management, patient reservoir, patient recruitment, patient management, and their pharmacoeconomic analysis. This achievement underscores the platform's capability for end-to-end operations in clinical trials. Meanwhile, the platform is actively exploring patient operations leveraging its online appreciability to assist partners in optimizing patient filtering, patient education, medication management, and patient data research insights, and other operational activities. With regards to R&D in medical area, we continue to upgrade our medical data center, which is now capable of completing first-level structuring for 10 different types of medical materials, adding approximately 600 new medical field categories. In the level of extracting drug information, such as for liver cancers, the system is now capable of automatically extracting information as disease staging, clinical staging, GMM staging, and other relevant details, providing strong data foundations for better customer service. Thank you for listening. I will now hand over to Yangzong to discuss our second quarter financial performance. Thank you for the talk. Hello, everyone. I will now walk you through our financial highlights for the second quarter. Before I go into details, please be reminded that all members who are here will be reading R&D. And please refer to our earnings release for detailed information on our financial performance on both the year-over-year and quarter-over-quarter basis, respectively. In the second quarter, all business lines were steadily responding. demonstrating strong business resilience. The company's revenue was $679 million, slightly lower compared to $705 million in Q2 of 2002, an increase by 12% compared to $606 million for the Q1 of 2023. Among them, insurance-related income was $597 million, representing a sequential increase of 11.4%. Profound service fee for $44.7 million, representing a sequential increase of 6.4%. Digital clean for time solution income was $29.4 million. It has increased by 28.9% sequentially and achieved a significant year-on-year growth of 167%. The company's overall premium cost and expenses have increased by 32.1% worldwide. and decreased by 20.9% QOQ. Operating costs increased by 36.2% year-over-year to $333 million for Q2 of 2023, compared with $245 million for Q2 of 2022, which was currently driven by two effects, a $73.2 million increase in cost of referral and a surge in fees. and an 8.9 million increase in cost of patient recruitment consultant teams. On quarter-on-quarter basis, operating costs increased by 34.3% in this quarter, primarily due to a 60.9 million increase in cost of referral and service fee. SMM expense increased by 41.6% to 205 million in this quarter, as compared with 144 million for Q2 of 2002, and increased by 18% compared with 173 million for the first quarter of 2003. Both YOY and QOC increase were primarily due to the increase in third-party traffic channels. G&A expenses were 96 million in this quarter, which remains stable on a quarter-by-quarter basis. R&D expense increased by 23.1% to 86.7 million year-over-year and increased by 10.2% on quarter-on-quarter basis. Both the QOQ and YOY increase are mainly due to the increase in R&D cost of human resources. In this quarter, the company introduced second reporting information for the first time, breaking down our revenue and profitability into three segments, insurance, crowdfunding, and others. In summary, the insurance segment had an operation profit of $99.8 million, while the crowdfunding segment incurred a $64.1 million operating law, and the other segment incurred a $47.9 million operating law. It is worth noticing that the company's overall profit is solely driven by the insurance segment. Objective net profit attributed to WaterShark in Q2 was $50.3 million. The gap net profit was $21.7 million, and we have generated gap profit over the past six quarters. As of the end of June 2003, the company had combined cash cash equivalents and short-term investments for $3.4 billion, indicating sufficient cash reserves. Overall, the business performance in Q2 was stable, looking ahead. We will continue to focus on user value and sustainable high-quality development. With that, we will conclude today's conference call. We do thank you for joining. Have a good time.
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