JD Health International Inc

Thank you for standing by. Welcome to the JD Health International Corporation 2025 Interim Results Conference call. At this time, participants are in listen-only mode. After management prepared remarks, there will be a question and answer session. Please note that this English simultaneous translation line will be in listen-only mode for the duration of the call, including the question and answer session. If you wish to listen to the management's original statement or ask a question during the question and answer session, you need to be dialed in to the China Central line. I will now turn it over to Mr. Liangzi, head of IR team. Thank you, operator. Good day, ladies and gentlemen. Welcome to our 2025 interim results conference call. Joining us today are J.D. Howe, executive director and CEO, Mr. Jianlin, and CFO, Mr. Mr. Hui, before we start, we'd like to remind you that today's discussion may contain forward-looking statements which involve a number of risks and alternatives. As a result, an outcome may differ materially from those mentioned in today's announcement and this discussion. The company does not undertake any obligation to update its forward-looking information except as required by law. During today's call, management will also discuss certain non-IFRS financial measures for comparison purposes only. For definition of non-IFRS financial measures and the reconciliation of IFRS to non-IFRS financial results, please refer to the interim results announcement for the six-month end of June 30, 2025, issued today. For today's call, management will read the prepared remarks in Chinese and will only be accepting questions in Chinese during the question and answer session. A third-party interpreter will provide simultaneous interpretation in English or conceptualize for the duration of the call. Please note that English translation is for convenience purposes only. In the case of any discrepancy, management statements in the original language will prevail. I would like now to turn the call to the first speaker, to Ms. Gina Lin. Please go ahead, sir. Hello, everyone. I'm Gina Lin, CEO for JD Health. It's a pleasure to share our 2025 first half results. From the policy standpoint, National initiatives continue to drive the high-quality development of the healthcare industry. The implementation of targeted measures such as a special action plan for promoting health consumption has further accelerated the health consumption sector's growth. According to the Healthy China 2013 plan, the total scale for China's healthcare service market is projected to reach RMB 16 trillion by 2030. Supported policy measures like expediting market expansion, reinforcing the certainty of sustained growth in the health industry on the demand side, health consumption has become a key driver of the emerging consumer market. For instance, the Year of Weight Management campaign launched by the National Health Commission has given rise to a blue ocean weight loss economy offering significant growth opportunities. Meanwhile, With the rapid advancement of the AI technologies, various government departments are actively implementing targeted policies to accelerate the application of AI technologies in medical services and health management. AI-powered, customized, and convenient healthcare services are clearly emerging as powerful catalysts for market growth. As the leading health service provider, we have accurately captured industry growth trends and leveraged supportive policies to achieve high-quality performance development. Amid our broader efforts to advance the Healthy China initiative, we continue to drive technological innovation and optimize our business models consistently, creating greater value for both our users and society. Now I'd like to share our business updates for the first half of the year, followed by a discussion of our business outlook for the second half. First, let me review our business development over the past six months, focusing on three key aspects. First, we strengthened our supply chain advantages and continue to enhance the value of our position as a first entry point for online health consumption. Since the beginning of this year, we have consistently optimized our omnichannel capacities focused on direct sales and online marketplace, plus on demand retail, to further increase the accessibility of the pharmaceutical and health products and improve the overall user experience. For starters, we have different collaboration with our partners to deliver the latest and most comprehensive range of pharmaceutical and healthcare product to users. For instance, in the ineptive drug field, we launched over 30 new products in the first half of the year, covering treatments for chronic diseases, digestive health, respiratory issues, and infections. Many of these arranged innovative drugs were launched nationwide on JD Health immediately following their domestic approval. Leveraging our supply chain advantages, we ensure that these coordinated treatment options reach patients swiftly while helping our partners to find market coverage a win-win outcome for users, the industry, and JD Health. Not only can users quickly purchase a wide range of healthcare products at JD Health, they can also access attentive professional services. For example, when we launched the Anytime 5th Generation Continuous Blue Post Monitor, We're setting this record by selling over 13,000 units on the first day. We also offered on-demand delivery and at-home professional support with device fitting and calibration. Additionally, we provide free online doctor consultations via JD Online Hospital for users to learn more about sugar management and control strategies. Leveraging our integrated online offline supply chain advantage, we continued to strengthen our core B2C business in the first half of the year, while also expanding our instant on-demand retail operations. Our instant delivery service now income passes over $15,000 across pharmacies, and our online medical insurance payment services reach nearly 200 million people nationwide. By integrating beta-3 pharmaceutical e-commerce, offline pharmacies, and the 30-minute distributed standard retail service, we have reinforced our near-field, far-field, and on-site pharmaceutical retail infrastructure effectively, meeting users' medication needs around the clock. Second, with online and offline service integration as core, we are deepening the development of the consultation, examination, diagnosis, pharmaceutical closed-loop service model in the first half of this year. We advanced the integration of online offline service format to further enhance our consultation, examination, diagnosis, pharmaceutical closed-loop model by funding our online hospital specialty care services and optimizing our home care on-demand service ecosystem. We aim to make use of small tiers and personalized healthcare needs. We focused on key specialty offerings such as dermatology, mental health, traditional transmedicine, oncology, and andrology. Continuously broadening and refining our online healthcare services. For instance, in dermatology, we provided the refined and personalized treatment solutions to over 20 million patients and launched the China's pioneering online rare skin disease diagnosis and treatment center. In addition, our home care on-demand services have expanded to cover 64 items in seven categories, including high-frequency scenarios such as home care and rehab services. Meanwhile, JD at Home rapid testing service now operates in 23 cities and offers over 116 types of testing. This in-hospital equivalent home services significantly enhance accessibility and users at home health management experience further reinforcing our advantages in the consultation, examination, diagnosis, and pharmaceuticals model. Third, we have prioritized the large-scale application of AI in specific scenarios to foster healthcare exclusively by technology. In the first half of this year, AI application in the healthcare industry flourished, aligning with development of new quality productive forces and serving as innovative solutions for the industry's long-standing, difficult-to-access, and high-cost pain points. As one of the earliest companies in China's online healthcare industry to develop and deploy AI, Judy Health has taken the lead in realizing multi-care AI applications, successfully upgrading and launching a series of AI-powered medical products such as the Gene, AI Gene, JoyDoc, and CanCon, covering various medical and healthcare scenarios, both in and out of hospitals, including consultations and drug purchases. Let's take the AI Gene product system as the example. As now, JD Health Online Hospital has launched more than 500 intelligent doctor agents, making it one of the largest online medical platforms in the industry in terms of the number of intelligent doctor agents and service gear. It also introduced a series of intelligent healthcare agents such as AI doctors, AI pharmacists, and AI nutritionists. Through the deep integration of technology and application scenarios, we have optimized the user experience and greatly expanded the boundaries of healthcare services. When you purchase any healthcare product or service on the JD app, you can access our intelligent agent consultation services. We encourage everyone to use them and welcome you valuable feedback. For the second half of the year, we will continue to strengthen our integrated online and offline medical service ecosystem and promote technological innovation, depending on our commitment to providing users with accessible, convenient, and affordable healthcare products and services. In the pharmaceutical and healthcare retail sector, we will enhance supply chain management, advance our omnichannel initiative, and continuously improve the accessibility of pharmaceutical and healthcare products and the overall service experience In the healthcare service sector, we'll gather more high-quality professional resources, such as doctors, nurses, and nutritionists, to expand our honor-tiered, personalized healthcare services. Scenarios at the same time, we'll continue to promote the application of AI products to achieve more intelligent, professional, and efficient healthcare services for all. As always, we remain committed to our business philosophy of a trust database, the value creation centered on customer costs, joining hands with our partners, creating sustainable health ecosystems and contributing to implementation of Health China 2030 initiative. Thank you for your continued support and trust in HGD Health. Now I'm going to turn the call to Madam Enhui to discuss the details of financial performance in the first half of 2025. Thank you, Enling. Hello, everyone. Thank you for joining JD Health's earnings conference call. It's my pleasure to provide an update on our performance in the first half of 2025. The first half of 2025, China continued to promote the high-quality development of the healthcare industry, explicitly calling for the cultivation and development of new quality product forces in the health consumption, and is supporting innovation in Intent Plus healthcare service model as the industry-leading healthcare service provider. J.D. Health has responded to the public's needs by accelerating quality upgrades across healthcare products and services and actually promoting AI-driven service model innovation. J.D. Health is committed to providing high-quality, accessible, and convenient health consumption and service experiences for users. J.D. Health achieved high-quality growth in the first half of 2025 with revenue of RMB 35.3 billion, up 24.5% year-over-year. We continued to strengthen the synergies of on-channel model, encompassing direct sales, online marketplaces, and on-demand retail, serving regional product offerings, enhancing user experience, and maintaining competitive pricing. We have continued to expand our cooperation with industrial leading pharmaceutical companies and health product suppliers, elevating customer brand awareness while consistently earning user trust. We also created new growth opportunities for our partners as of June 30th, 2025. Our annual active user accounts for the last 12 months reached 200 million, A net addition of approximately 20 million compared to June 30th of 2024. First, our direct sales revenue for the first half of 2025 increased at 22.7% year-over-year to RMB 29.3 billion, constituting 18.3.1% of our total revenue. In the pharmaceutical sector, we empowered our partners through new and specialty drug launches on the China expansion and digital marketing. During the first half of 2025, over 30 interview drugs debuted on JD Health, including Chin'er Mei, another weight loss drug developed by Innovant Biologics, and a new domestic anti-influenza drug developed by Changfeng Pharmaceutical. JD Health also set new benchmarks for innovative cooperation with multiple global pharmaceutical companies. For instance, we forged a strategic partnership with NovoNautics to develop an integrated one-stop medical solution for basically diabetes and related diseases built in a full-circle service system. In terms of medical devices and health supplements, we partnered with multiple brands to launch several products online. Notably, the U.S. Anytime Fifth Generation Continuous Glucose Monitor debuted on JD Health offering users on-demand delivery service thanks to our own China supply chain network and service capacity. Second, our service revenue reached RMB 6.0 billion in the first half of 2025, representing growth of 34.4% year-over-year, and accounting for 16.9% of total revenue. This proportion has the recent 1.2 percentage points compared to the same period in 2024, with relatively high growth rates sustained in advertising service and platform commissions. We continue to help brand partners achieve sustained business and user growth by focusing on new health consumption scenarios and precisely aligning with the user consumption needs, which attracted increased marketing investments from brands. At the same time, we continue to enhance the synergies between our direct sales and online market businesses. By supporting partners, merchants, and significantly enriching product variety on our marketplace as of June 13th of this year, the number of merchants on our marketplace exceeded 115,000, an increase of over 15,000 since December 31st of 2024. Starting the first half of 2025, we further developed our on-demand retail business. We continue to expand our instant delivery service coverage and fulfillment capacities, collecting over 200,000 pharmacies nationwide. We also extended the reach of its online medical insurance payment services to nearly 200 million people meanwhile. We continue to explore innovative retail pharmacy models to deliver ultimate channel retail experiences to users across different regions. For instance, JD Health and the Beijing Children's Hospital have entered into a strategic cooperation framework to jointly promote the pediatric pharmacy model. This cooperation aims to establish dual-channel certified pediatric specialized pharmacies integrating online and offline services payment systems, and delivery network. In healthcare services, we continue to enhance our online hospital specialty offerings, establishing five core specialty areas, dermatology, mental health, traditional Chinese medicine, oncology, and andrology. In dermatology, we deepened our focus on the diagnosis and the treatment of common and specialty diseases by offering dedicated clinics for allergies, pediatric dermatology, healthcare, and cosmetic medicine, delivering refined and personalized treatment solutions to over 20 million patients. In the first half of 2025, we continue to solidify our industry leadership in at-home care. healthcare services by fully enhancing our one-stop closed service model. For instance, we further strengthened our home care on-demand service capacities and continue to iterate our service offerings. As of June 30th of 2025, more than 12,000 nurses had begun offering services on JV Health platform. During the first half of 2025, we also continued to expand the JD at-home rapid testing service network, offering over 116 types of testing to users across 23 cities in China. From a profitability perspective, our gross profit margin in the third half of 2025 increased 1.6 basis points year-over-year to 25.5%. demonstrating our efforts in deepening our supply chain network. We also enhance the brand marketing resources by reaching our marketing products and distribution channels, increasing investments in advertising resources and deepening cooperation with brand partners. Looking forward. Ahead, we'll further tap into the value of the retail pharmacy plus healthcare service closed-loop ecosystem. Meanwhile, we will continue leveraging our supply chain advantages to prepare the integrated development of the online and offline health service ecosystem and further expand our market share for all product categories. On non-office basis, our fulfillment expense ratio in the first half of 2025 was 10%, a decrease of 20 base points from the same period of 2024, benefiting from the cost dilution driven by increased order volume. In the first half of 2025, our selling and marketing expense ratio was 5.1%, increasing by 20 base points from the same period of 2024, with installing and marketing expenses rising by RMB $420 million year-over-year. To further reinforce user perception as a trusted destination for both medical consultations and medicine purchases, we organized major campaigns during the year's 2018 grant promotion, including JD Medicine free orders and super symbol initiatives. In the first half, our R&D expense ratio was 2.1% improvement of 10 basis points from the same period. In the first half of 2025, leveraging industry's richest collection of online health scenarios, we took the lead in building AI-powered full-spectrum health service matrix that integrates AI doctors, multi-intelligent service agents, and intelligent doctor agents, accelerating the advancement of internet-based healthcare into a new phase of a scaled AI application. As of June 13, 2025, AIG intelligent agents had cumulatively served over 50 million users, covering every healthcare scenario at every stage from consultation to medication purchase and use, additionally, Benefiting from our rapid business growth, we enhanced the utilization efficiency of fixed R&D expenses such as the service by 2025. We expect to complete AI QI program in collaboration with partner doctors to further broaden the specialty coverage of intelligent doctor agents to address the increasing demand for high-quality health resources. We will continue to advance our work in healthcare AI to deliver healthcare services that are more convenient, professional, and inclusive, reaching a wide population. Our GA expense ratio was 0.8% in the first half of 2025, flat within same period of last year. Our back-end staff and operational management efficiency levels continued to lead the industry. Finance income decreased to RMB $1.4 billion in the first half of 2025, up 12.7% year-over-year, many attributable to lower years on wealth management products resulting from interest rate cuts. Excluding share incentives, non-offers net profit in the first half of 2025 increased by 35% year-over-year to RMB 3.6 billion with a margin of 10.1%, rising 18 basis points year-over-year, reaching a record high for the same period of the year. Our cash flow from operating activities reached RMB 6.2 billion in the first half of 2025. As of the end of June, total cash resources were RMB 16.6 billion, a net increase of RMB 6.6 billion compared with December 31st of 2024. To sum up, the first half of 2025, JD Health maintained high-quality growth across its entire business, with a steady improvement in operating efficiency and profitability. At the same time, we consistently expanded the new business, such as the on-demand digital, and accelerated the application of healthcare, AI, and other technologies across diverse service scenarios. Finally, I'd like to express my heartfelt thanks to our shareholders for their enduring support and trust in JD Health. Looking ahead, we'll continue and remain dedicated to our business philosophy for trust-based value creation centered on cost-effective health and focus on cost efficiency and experience, constantly leveraging non-supply chain advantages to prepare the integrated development of the online and online healthcare service ecosystem. Meanwhile, We will continue to advance our business on all fronts, increasing our market share and industry influence to create greater value for our shareholders. That concludes my remarks. Please now go and open some questions. Thank you, Madam Dunn. And this is the prepared remarks of the JVM management. And we are going to ensure It's simultaneous interpretation speed. Now we are going to have Q&A session. Thank you. As a reminder, please press down one on your telephone touch-tone keypad. Due to time constraint, please limit yourself to two questions. If you have any follow-up questions, please re-enter the queue. Thank you. The first question from Bank of America. Miranda, please go ahead. Thank you for the prepared remarks of the management. Congratulations for the wonderful achievement. In the first half of 2025, we have seen great growth momentum. I want to invite our management to say more about your middle and long-term strategies. Thank you. Thank you, Miranda, for the questions. In my prepared remarks, I mentioned that, generally speaking, due to the healthy health consumption trend as well as the policies on the AI demand. In China, the market size is expanding and is having a lot of potentials. It reflects that more and more consumers are having precise and personalized requirements to maintain health. These trends are very positive. Those trends are our basis for us to make long-term strategies. Over the last half year in the healthcare sector, we continued our role to spend and maximize our benefits of the supply chain. We want to make it good and efficient, following the requirements of the users. We are providing different strategies, such as a new product launch and personalized real-time services. We are having good targets and well-designed As we are having details, this will include as well as different categories for improving our outcomes. And we are also having the online doctor, online purchase of medications, and the two-door delivery. This model is using with the online hospital and two-door services, maximizing the beauties of the synergies, serving more patients, and the doctors will join us online. The drugs will be delivered at home. This service will be delivered online. This is our very one-stop services. In terms of tech-driven innovation, our focus is on the deep integration of technology with plastic applications. In the short term, AI has already been proven to be a valuable tool in the long run. The AI is to respond to supply and availability of the healthcare services. and we are seeing it as a great productive force. Our strategy is centered on our user needs. We started by deploying AI across our existing business, enabling more consumers to experience the convenience and optimization of the AI-powered services anywhere, anytime. Building this foundation, we continue to focus on upgrading our large model devices and expanding the frontiers of the AI in-house and healthcare services. Thank you. Thank you very much for your response. The next question comes from Feng Shicong from CICC. Please go ahead. Thank you very much for having me here. I'm from CICC Med Team. I'm with the Feng Shicong Preparation for the Wonderful Achievements of the Last Half Year. And I've noticed that the AEI products have been upgraded dramatically. Can you share with us more about the AI strategy from the company perspective? Thank you very much for the question. Regarding the market position, JD Health is a leading company in China. We have our cutting-edge healthcare large language models and a signature AI-enhanced healthcare offerings. One purpose is make the JD Health a application and access points everywhere to be seen. Everybody who is using JD Health is our user. We are going to improve the quality and efficiency of all the businesses and services. And we're also going to create a new supply of the healthcare service, which will in turn create more traffic and do the growth. We have the fully deployed AI across existing businesses. By June 30th of this year, our AI gene intelligence agents have served over 30 million users during the June 18th one promotion of AI doctor that we achieved a user success rate of 97%. We helped the doctors improve their working efficiency as well. We're also seeing that the doctor DJ Twin has helped experts in increasing their diagnostic efficiency of 15%. Our intelligence service agents, like AI doctors and AI pharmacists, have a boosted user purchase conversion rate. The conversion rate of the AI science consultations was 10% points higher than the human-operated consultations. These AI products have significantly improved our user experience. Thank you very much for the question. Thank you very much for the answer. I've done my question. Next question comes from Lincoln from Goldman Sachs. Please go ahead. Thank you very much for having me here. Congratulations again for the wonderful achievement. My question is on the new business. How about a new business innovation, especially in the second half of this year? We are watching closely to the on-demand retail. Can you share with us more plans? Thank you. Thank you, Lincoln. It's great for us to see the growing attention on the demand retail. In the first half of this year, we further accelerated the rollout of our next-generation pharmacies with over 100 offline stores now operational. We are paying close attention to synergies between the existing businesses and the next-generation service offerings. On one hand, we integrate rich variety of health consumption scenarios to further enhance user experience and elevate the brand recognition of the daily health for consultation and medication purchase. On the other hand, by harnessing our B2C e-commerce strengths, we are establishing a more advanced industry-leading omnichannel supply chain to this new demand retail model. It will further improve our overall industry efficiency and benefit all our partners from upstream industrial brands to downstream pharmacies. We will continue to explore next-generation business models and service scenarios to advance the penetration. Step four, exploring and starting new stores. We will also offer refined efficiencies. To improve the efficiencies, we find operations optimizing the product service experience and fully leveraging between the offline, online, B2C, and O2 channels. This will help us better meet users' on-demand healthcare needs. Our self-operated O2O pharmacy stores use our in-house supply chain services, which gives them significant advantages in economical care and supply chain efficiency compared to many stand-alone pharmacies. By integrating our online and offline models, our average store productivity is higher than the industrial average. Additionally, our four-year investment plan will remain flexible. We will focus on innovating offline offerings and improving our user experience. We are also paying attention to ROI and synergies with our existing business. Thank you very much for this question, and that is our answer. Thank you very much. Next question comes from Henry of UBS. Please go ahead. Thank you very much for having me here. My question is on the medical insurance payment. The company as well as our competitors are speaking about the new breakthroughs. I want to listen to your comments on the new developments. And for the business models, except for old to old, do you have new business models to be explored? Thank you. Thank you. For the medical insurance payment, our goal is to further enhance the online medicine purchase with medical insurance payment services in private cities under the auto model and to track user growth in this region. Meanwhile, in areas where policies are more advanced, we have been running pilots of the online medicine purchase with medical insurance payment service in our direct-sales business. Our objective is to leverage medical insurance programs continuously, elevating JD Health's brand as the go-to platform for consultation and medication purchase. While continuing to explore more healthcare service scenarios and refine and iterate our business model, we believe that if the policies are relaxed further, building on the first mover advantage, inductee business models, and on-chancellation assistance to the health and well-being industry in advancing payment services. Due to time constraints, that concludes today's question on this session. At this time, I will now turn the conference to Dr. Lee for any additional closing remarks. Thank you once again for joining us today. If you have any further questions, please contact our IRT director. Thank you.