JD Health International Inc

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International Publication 2025 Annual Result Conference call. At this time, our participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Please note that this English simultaneous translation live 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 arrangement statement or ask the question during the question and answer session, be dialed in to the Chinese line. Please listen to Jiang Zeyi head of investment relations. Thank you, operator. Ladies and gentlemen, welcome to 2025 Annual Results Conference. Go join us today. RJD House Executive Director and CEO, Mr. Cao Dong and Mr. CFO, Ms. Skeng 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 uncertainties. Actual results and outcomes may differ materially from those mentioned in today's announcement. In this discussion, the company does not undertake any obligation to update this 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 annual results announcement for the year ended December 31, 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. The third party interpreter will provide simultaneous interpretation in English on the reception line 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'd like to turn the call over to Mr. Cao Zhong, Principal Head, sir. Hello, everyone. I'm Cao Zhong, CEO of JD House. It is a pleasure to share with you our 2025 four-year results. In 2025, China's economy maintained steady and within momentum in its foundation for companies' continued development. The government actively promoted development of new quality productive forces in the health consumption sector and encouraged the standard adoption of AI across the healthcare sector, charting a clear path for long-term significant growth. 2025 marked the return of JD Health's return and profit to a trajectory of rapid growth Further reinforcing our positioning as a market leader, as an industry-leading healthcare service provider, we continue to deepen our presence across key healthcare segments through our online channels, super pharmaceutical supply chain infrastructure, comprehensive AI-powered online healthcare service capacities, and the full lifecycle healthcare management ecosystem. remain committed to delivering accessible, convenient, high-quality, and affordable healthcare products, as well as our solutions. In 2005, we continued to capitalize our super-format surgical supply chain advantages and the industrial-leading direct sales capacity building an AI-enabled full-scenario healthcare services ecosystem that supported sustainable high-quality growth. In fourth quarter, revenue reached RMB 21 billion, representing an over-year increase of 27.4% after it reached R&D 1.1 billion, up 13.5% year-over-year, with net margin of 5%. For 2025, our revenue reached $73.4 billion, representing year-over-year of about 26.3%. Now average profit totaled $6.5 billion, up 36.3% year-over-year, with our non-average profit margin 8.9%. Notably, we delivered revenue growth of more than 20% year-over-year for four consecutive quarters, while our full-year non-profit margin reached its highest level ever since IPO in the pharmaceutical sector. Leveraging our supply chain strengths, we continue deepening our partnership with pharmaceutical companies as the first online marketplace for new and specialty drug launches. We introduced more than 100 new drugs during the year, a significant growth from 30 in 2024. Taking the DevEagle as an example, this flagship collaboration Between ESA and JD Health, we stated that 20,000 orders in launch month alone. At the same time, by working closely with pharmaceutical companies to promote innovative integrated consultation pharmaceutical and service posting model, we are strengthening those partnerships and establishing a novel healthcare ecosystem that supports comprehensive collaborative relationship. For instance, we established strategic collaboration with NovoNautics during only a century-long expertise in chronic disease management and treatment solutions, together with JD Health, a fourth in our real healthcare service capacity, which want to establish a dedicated public health hub on obesity. This initiative supports a one-stop diagnosis and treatment of medical solutions for diabetes and drug-dedicated transformation. We also formed this strategic partnership with analytic to promote the innovative digital health solutions for patients in China who are overweight, living with obesity and have diabetes or alopecia areata. Those solutions integrate patient education, like consultation, medical supply, and long-term disease management. In health supplements, we fully harness our direct sales capacity to actively engage in product co-development, supply chain structuring, professional service enhancement, and industry standard setting to reinforce our platform's central role across our value chain by focusing on the senior nutrition, child development, DOD supplements and ready-to-consume nourishing products. We have helped brand partners to achieve steadily sustainable growth, for instance. While the standard deep-sea fish oil market is ready to mature, we identified a growing consumer demand for high-purity, high-absorption products. We've been significant on the potential based on these insights. We worked with GNC to develop a premium fish oil product tailored to market needs sufficient to protect the cap. in the high-end segment, featuring 93% of high-quality EPA. The product garnered over 15 billion impressions on its launch day on JD Health's platform. In medical device, we fully integrate our supply chain strength to build the simplest online-to-offline service loop, driving industry-wide upgrades through the online technology innovation, for instance, in collaboration with Uber Medical. We launched the JD Brand Continuous Cost Monitor on our platform, which can be collected directly to JD Health app via Bluetooth to deliver an integrated block glucose management experience, covering monitoring, analysis, intervention, and tracking. For users who require device setup or configuration assistance, we offer in-home support with healthcare professionals providing hands-on guidance through the process. In response to the National Initiative for Neurology Products for Seasonal Health, we provided the capacities and medical AI solutions to a wide range of ecosystems. We aim to enable high quality and sustainable development, such as the Dawei, Dr. Dawei, and the suite of multi-role intelligence service agents, AI Doctor Twins, and AI Health, Chatbot, and Can-Can. At the end of 2025, Dr. Dawei has completed hundreds of millions of interactions. The JoyDoc 2.0 zero-version comprehensive management solutions, finding three key areas, clinical, nutrition, pharmaceutical services, and weight management. This product provides healthcare institutions with a standardized, traceable, and high-efficient digital intelligence support. We work together with the First of Later Hospital, Windermere University, and the Union Hospital of Atonement College to cover 5 million patients in 2025. Our on-demand retail business also breaks through Through the year, we continue to expand the online medical insurance payment services as well. We have extended coverage to 29 key cities. By 2025, we have established more than 300 separate pharmaceuticals nationwide by integrating those stores with our on-demand retail business. We have further differentiated over product offerings and enhanced overall user experience. Additionally, we continue to strengthen our integrated offline medical services. GDH's home rapid testing service maintains strong growth momentum with full-year order volume increasing by 81.9% of add-on rapid testing service plan near the hospital-grade home testing service during the year, extending the professional practices to hospital laboratories into the home setting for 16 core cities, including Beijing and Shanghai. This service exemplifies the deep integration We have achieved across our supply chain and digital platform strengths and the professional medical expertise of the public hospitals during the peak respiratory seasons. It effectively eases hospital congestion, shortens patient visit time, and lowers the risk of a cross-infection caused by HIV health, service capacity, and digital coordination system. The process from sample collection to report delivery takes an average of three hours and can be completed seamlessly with the app. Looking ahead, we will continue to strengthen our Super Pharmaceutical Supply Chain, the defined adjacent tree on user experience, cost, and efficiency. By capitalizing our direct sales basis and deepening collaborations with our brand and ecosystem partners, we further cement our leadership in the healthcare retail market and reinforce users' awareness of J.D. Health as go-to-the-platform for online health product services. At the same time, we will continue to advance technology innovation and AI applications, empowering our integrated consultation, examination, diagnosis, pharmaceutical service, closed-loop through an AI-plus supply chain strategy, and supporting the high-quality growth and sustained development of the broader healthcare sector by steadily expanding our healthcare consistent service scope and consistently enhancing our integrated online and offline medical services We will share better experiences to produce a snappy, small, conceivable system for financial performance. Good to see you. Thank you for attending and joining the JD Health Earnings Conference call. This is Deng Hui. It is my pleasure to provide you update on the fourth quarter for year 2025 financial performance. In 2025, China's macroeconomic landscape continues to show a positive recovery trend. ushering in new development opportunities for AI-driven health industry. DD Health actively responded to the policy directive of fostering new political forces in the health consumption sector. Achieving sustained and high-quality growth in 2025, the revenue reaches $73.4 billion, representing a yearly over-increase of 26.3%. Now, average profit amounted to RMB $6.5 billion, up 36.3% year-over-year, with a profit margin of 8.9%. It's worth noting that our revenue growth rate has maintained about 20% for the consecutive quarters, while our non-offered profit margin reached its highest level since its listing. In the fourth quarter of 2025, revenue totaled $21 billion, up 27.4% year-over-year non-offered profit for the quarter, reached RMB $1.1 billion, increased by 13.5% year-over-year with a profit margin of 5%, as of December 31st, 2025, our annual active user accounts for the past 12 months stood at approximately $220 million, with an addition of $34 million compared to December 31st, 2024. Among other revenues, direct sales revenue reached RMB $16.9 billion in 2025, representing the LBA increase of 24.8% and accounts for Earning 2.9% of the total revenue, this growth was primarily driven by increased sales of chronic disease-related drugs and expanded the first launch partnership for individual drugs as well as health supplements, where we focused on strengthening our direct sales capacities and cultivating growth in high-quality segments and sales of new created medical devices. Meanwhile, service revenue reached the RMB Top 0.6 billion for the full year of 2025, up 34.1% year-over-year and accounting for 17.1% of our total revenue. Increase of one percentage point a year-over-year with platform commissions and advertising services, maintaining strong growth momentum. During the year, we prioritize the onboarding of emerging brands. significantly increased the resource allocation to merchant support and expanded the merchant's access to our omnichannel infrastructure and resources fostering growth for both the platform and our merchant partners. We continue to advance our on-demand retail business in 2025 to be more efficient and accessible on-demand services to our users by continuously strengthening synergies among supply, fulfillment, payment, and expertise and experiences. in healthcare services with further development of a net-plus healthcare service ecosystem through AI empowerment this year, achieving scale deployment of AI technologies across consultations, abnation, diagnosed, pharmaceutical scenarios. We launched a series of AI-based solutions tailored for users, doctors, hospitals, primary healthcare institutions, including AIG and JoyDoc, establishing the industry's most comprehensive AI-enhanced health service matrix. Our AI agent, Dr. Dawei, has completed hundreds of millions of user interactions with a 98% satisfaction rate. Meanwhile, JoyDoc has accumulated and served over 5 million patients across several hospitals, including the first affiliated hospital, Benjamin University, and the Union Hospital, Baton Rouge Medical College. From the profitability level, JD Health's growth margin was 24.8% in 2025, up 1.9 percentage points year-over-year. The improvement highlights the core strengths of our supply chain as well as the ongoing enhancement of our direct sales capacity. Our direct sales mode effectively drove growth margin expansion through economies of scale while empowering our professional procurement and sales teams to identify industrial trends and capitalize high potential subsegments, boosting overall operational efficiency. At the same time, we encourage a greater resource investment from merchants fulfilling growth in higher-margin business advertising services on non-offer basis. Our fulfillment expense ratio was 10.4% in 2025, up 0.2 percentage points. Our selling and marketing expense ratio maintained largely flat at 0.2% in 2025 compared with last year. Responsibly, as you show, Divas hit the road this year promoting awareness of our quality standards for nutrition products. Well, helped drive sales growth in the health supplement segment, although selling and marketing expenses rose by 22.9% year-over-year. Our RMD expense ratio was 2.2% in 2025, slightly by 0.1 percentage point year-over-year as a result of our ongoing investment in AI technologies. As of the end of December, we had over 880 R&D personnel increase compared with the previous year. As revenue continues to grow, the proportion of fixed R&D expenses will decline accordingly, while the productivity of our R&D team will also improve. We remain committed to investing in health AI technologies and have launched a suite of AI-empowered products, serving users dark Hospitals and primary health institutions caused multiple health care scenarios moving ahead. We will continue to plan our efforts in these areas. The GA expense ratio was 0.8% for the full year of 2025, starting with 2024. Our backend staff and operational management efficiency levels continue to lead the industry. Finance income was RMB 1.5 billion in 2025, attributable to increase the cash balance. Other income gains net was approximately 1.6 billion in 2025, then reflecting fair value changes in wealth management products, including share incentives from a non-effort profit for 2025, increased by 36.3% year-over-year, to RMB 6.5 billion with a margin of 8.9%, up 0.7 percentage point from last year, which is the highest level ever since our IPO. Our cash flow from operating activities reached RMB 10.2 billion for the full year of 2025 by the end of December. Cash and cash equivalents, restricted cash, term deposits, and wealth management products measured at a fair value through profit or loss and amortized the cost that totaled $96.5 billion, a net increase of RMB $10.1 billion compared to December 31st of 2025. In summary, JD Health delivered a high-quality growth in 2025, underpinned by continuously optimized operational capacities and steady profitability growth. Our strong performance highlights our persistence, enhancing user experience while improving cost efficiency by developing and refining AI-powered health service scenarios. We have broadened our business scope, further validating the distinctive value propositions of our dual-engine business model. That concludes our prepared remarks. We are now open for questions. Thank you, Matt and Denghui. Those are the prepared remarks from JD Health. Now let's get into the Q&A session. Now we are going to get into the Q&A session. If you have any questions, Please press Start 1 on your telephone's touch-top keypad during this time. Due to time constraint, please limit yourself to two questions. If you have some phone questions, please re-enter the queue. Thank you. Now we are going to welcome Melinda from American Bank. Please go ahead with your question. Good evening, dear management. Thank you very much for the prepared remarks, and thank you for accepting my questions. In 2025, You achieved a faster growth and you had very good growing momentum with a better profit margin that are great news. I have a question to you. Can you share with us the near-term and the three-year middle-term prospects? What will be the main growing points and what will be your strategies? Thank you. Thank you for the question. You're my old friend, Miranda. I want to share with you the general directions about the tracks for the future growth. We know that pharmaceutical sector health products and medical devices are belonging to one community. The market size is around the 3 to 4 trillion RMB yuan. This is the size of the total market share, and we have to check different proportions so you could fully understand. in the entire year the revenue is 3 17 billion rmb compared to the potential of the market we're still having a big room to grow which means that we have a lot of opportunities to grab currently we could achieve more than one digital growth potential i believe that this is a huge market despite the fact that jd house is a huge pillar we could also go faster and we could go deeper that is our That is our inspiration and that is our commitment to go deeper and go faster, built on our existing advancements and results. The next point is from the perspective of the users. Currently, around 220 million users were out there and the total number is still growing. And we have a lot of active users, but not as big as a total user base of the JD Group because we are JD Health. We could still have a big room to grow. So I'm just sharing with you the size of the sector as well as the users of JD Health. I believe that from both fronts, we could do a lot of things to grow our potential, to be more specific for the next one, two, three years, what will be happening and what will be the key drivers. To start off, I want to go back to the product portfolio and what will be the growing momentum. I'm going to speak about the products, the pharmaceutical products. For the long run, we are in the leading position and we are growing very fast. We continue to improve our performance in 2025. The new drugs are taking 15% and we are growing. very fast compared to the velocity of 2024. You could feel the change and you could feel the transformation. Build on the mindset of JD Health, more brands, more pharmaceutical companies and more manufacturers will come to us. They will finally realize JD Health is a huge platform. We could help them, we could empower them, we could bring to them additional value. The new products, the special drugs, could have very good sales at our platform, driving us to embrace a larger number of new drugs on their first sales. This is a very positive trend, and I could very happily share with you. I believe that in terms of the pharmaceutical companies, we will continue to grow. I believe that this market will grow, of course. We have the in-hospital and off-hospital markets, and off-hospital markets will be moved to the online setting at an even faster manner. Those are the trends we could observe on the market. That's why I'm so confident in sharing with you our growing potential and growing room. In terms of the health supplements, we follow, I know that you followed us for long-term, When we are discussing the pharmaceutical companies and health supplements, you should know we are offering the best quality products. We could offer you very good user experiences as well. We go very fast and we are highly efficient in delivering our services and offerings. We are doing more than selling. We are also providing the evidence-based solutions. It's like we're collaborating with the GNC. We are jointly releasing the white paper, providing better service and occasional resources to the users. We're also providing the premium fish oil, improving the user experiences in the overall manner. We want to add user experiences, and we want to add user value. We are not selling products in an efficient manner. We're also helping the users to select the best ever products. And we're also an online platform having huge integrated logistics chain advantages, which means that we are having this pillar and we will grow this as well. The next topic is biomedical devices. I want to give you a case by collaborating with Uwell to offer customized products. monitoring of the glucose device it is well said and for the next step we have more plans in terms of themselves we will provide the software hardware as well as integrate the quality disease management plan if you tried our product you can know how well it is it is very unique and it's very special when you are if you try to do well glucose monitoring device you can know how good it is You could know which food is good for you and what are the food bad for your health. I believe that is the best collaboration model. You could manage your food, you could manage your diet, and you could complete all those processes through our product. And we are now promoting AI-empowered health management device. This will be the new ecosystem.

AI is a keyword, very popular.

In 2025, we launched the AI doctor, Dr. Dawei, completed the hundreds of millions of inactions with online users with a high level of satisfaction ratio. The AI matrix includes the 2B, 2C, and 2H fronts with a very good performance separately. Those performances are not yet fully matured. They are not translating directly into sales revenues. However, we can safely say that they will be the future drivers helping JD Health to garner potential profits. In the long run, they will be our long-term drivers. I'm just sharing with you those highlights for reference. Thank you, Miranda. Thank you for the rest of investors. Now, please start your second question. The next question. comes from UBS, Henry Liu. Please go ahead. Thank you for the prepared remarks, the management, and thank you for having that question. Can you say a few words about the competition landscape of the company? For instance, we have the e-commerce platforms, we have the brick and mortar physical stores. How you can stay competitive among all those competitors? For the long term, I'm confident in standing out of all those competitors and market players. If you are watching and following us for the long run, you know we are a company with a lot of pragmatic mindset and behaviors. You know how we check and observe this market landscape. You know how we view our competitors. From the perspective of JD and JD Health, we are good at managing the supply chains. We are good at managing our own branded products. Because we want to manage the quality of the products, we want to ensure the best efficiency on this market. In terms of health market, healthcare market, those elements are matching. We want to manage the health of the users and we have a strong mindset. That is why we are standing out compared to other competitors. That is in our DNA. That is in our blood vein. And we are maximizing our DNAs. In the company, the revenue is going very fast, of course. But our market penetration rate is not as good as we expected. In the future, the market will be highly fierce, of course. But this market is not yet fully competitive. It's not receiving full competition. Every company could have their own proportion and share. You could manage your supply chain, you could play up your strengths, and you could do something with a lot of pragmatic behaviors, and you could improve their health. So we could extend our strengths in the long run, and we could further extend our market scale That is my general impression, and that is my short answer for your question.

Next question, please.

The next question comes from Hightone International, . Please go ahead with your question. Thank you for having me here. I'm from Hightone International. Congratulations. Thank you for sharing with us the great results in 2020 slides. I have some questions to you. For the next few years, what will be your plan to start the brick and mortar stores? And what will be the impact for the online practices? And for the IFC, what will be your future plan? Will there be any change? Will there be any large M&A plans? Thank you. I want to take those questions with more elaboration. I believe a lot of investors are very interested in those points. First of all, we don't have the plan to have a large-scale M&A. But it doesn't mean that we don't care about the offline practices and offline maneuvers. The efficiency, the cost of running the brick and mortar stores, one of our key strengths is, of course, I talked about the medical insurance policy. This is very key in managing the brick and mortar store, the pharmacy. 35% of the gross margin will be the bench line. It's not that high, of course. And we have a lot of good chances. we are not relying 100% on medical insurance. And we could ensure the security of the business. Of course, the growth margin was not as high as we expected when we are running it online, but still very satisfactory, but still satisfied with all those results. When we are running the offline stores, We prioritize. We also care about their practices because around the $2 trillion, in terms of the market share, $2 trillion belongs to the offline practices. And some of them are belonging to the in-hospital market, around 17% to 8%. It matters. I don't think the online business can 100% replace the offline business. Still, we have to watch closely to the development of the offline business, but how we are going to maximize our strength. There are two sets of practices. The offline pharmacies are for one thing. We are running 300 of our offline pharmacies up to now, 300. Those pharmacies are serving their neighbors. We are consistent in promoting the offline pharmacies. Those offline pharmacies are good at delivering immediate service requirements and demands. In terms of the data, they are accounting for 10% in terms of market share. Some patients want to have immediate medical products. The scale, the size of the pharmacy is not big. Our priority is on B2C business to customer. But this is a very important scenario for us to manage the customer relationship. And we will do a good calculation. How are we going to manage the stores? How are we going to manage the operators or the users? And this is a platform with lots of openness. And we are collaborating with the chain pharmacies as well. those solver business patterns and business scenarios to better serve the users, bring them the premium experiences. So I don't think we're going to have a large-scale M&A to cover the offline pharmacies. I don't think so. We may maintain the structure, the size. And offline pharmacies, in terms of numbers, too many. altogether 700,000 in totality. I believe that we can do more to improve their overall efficiency. The next is about the checkup centers. I believe that checkup centers are providing us a new area to grow our business strength. We can do a better job improving the quality, and that will be the new entry to collect the different dots. I believe that the offline checkup centers will be the entry points to manage the health. Now we have several checkup centers in operation. We're not in a hurry to duplicate the model. We want to maximize the JD DNA, be pragmatic, will be patient, will be accepting the market changes. We will never go too fast. We are having a long-term vision of being the guardian of people's health in China. And we want to do a good job. That is our practices for the offline business. We will never do it overnight. We will not complete all the business over a short term. We will be stable and we'll be cautious. It's a step-by-step manner. or the business scale will be extended and there will be no obvious shock to our core business. So we believe that whatever we are doing, the AI-empowered practices, the offline pharmacies will go very steadily, step by step, improving the users' experiences. Before each step we are marching on, we'll find out what will be the long-term missions what will be our purposes before we are taking up this step now we are using a lot of ai technologies we are improving the general efficiency very positively the ai nutritionalists are also good practice the conversion rate is even higher than the real person nutritional practitioner I believe that the offline pharmacies will also be greater scenario for after use and to administer the AI practitioners. So don't worry about large scale MIA from JD Health. We will do everything step by step with very good reason. Thank you. Next question from Goldman Sachs, Lincoln. Please share with us your question. Thank you very much for having me here. Congratulations for you to have the 2025 outcome. I have a question on the progress of the AI Plus. We share with you your opinions about the supply chain, about your practices for the future. Thank you. Again, I want to give you our overall planning. There are several directions ahead of us. The first is a Tuesday to customer direction. You could check what happens in JED application, on JED Health application. We have the Dr. Kang Kang. We have the Jing Dawg. For the 2C side, you could have the Jing Yi. They are doctors, the Dr. Dawei. We have the pharmacist. We have the nurses. They are AI bots. They are AI twins. A lot of consultation services are out there. The shopping services, the before and after sale services are out there. The conversion rate, the satisfaction rate, the user experiences are very positive. The online consultation is booming, empowered by the AI technologies. Those are the good outcomes from the 2C front. However, it's not right time for us to commercialize all those practices and assets, but still we're in a good position, we're in a good direction to have the commercialization. Now we have the GENE, we have the 2H, the hospital front. In the future. I hope that we could get collected to the hospitals. We are speaking about 70% of the resources of the 2 trillion market size will be in different hospitals. We want to expand our market share, relying upon the partnership with different hospitals. The hospitals will help us to manage the patients. For instance, we could do a brief consultation We can do the pre-consultation, helping the patients to check in the right department. Those are something we can do before the hospital entry. For the post-operation, diet and nutrition, we could also have the AI to help those patients, and we can collaborate with the hospitals. in the future we could manage this business with incremental growing momentum and for the 2b side the 2b side is for is operated for the doctors totally free of charge however how we are going to set up a good business model how we're going to have defined commercialization we're still in the process of the pondering on in china is very special for the doctors to pay still i believe that as long as the products and the services are excellent we could have sort of some methods to charge still it's a very complicated value chain in the medical sector there will be the right payer that is the question we have to keep thinking and we have to avoid the homogeneous competition no matter what those are the directions we are embarking on and we are seeing a much more clear directions and light at the end of the tunnel in the near future i believe that we could see more frequent ai application with positive outcomes if there's any feedback, and we will keep a close eye on this market. But please keep it in mind, JD Health has very good AI innovation practices, and we go very steady by collaborating with the stakeholders, and we will continue to promote the innovative drugs. When we are checking the market, it looks very dynamic, and it looks very popular, but we will be the ones who stick deeper to this market, and we will give you the good solutions. Because all in all, we want to serve the patients. We want to serve the users with good experiences. We are more than a observer. We are practitioners. Thank you. For time's sake, we are going to close the Q&A session. Now I'm going to welcome Zee to give us the closing remarks. Thank you once again for joining us today. For further questions, please contact our team directly. Thank you.