In the first quarter of 2024, Waterdrop Inc. (ticker not provided) has reported a strong financial performance with a 16.3% increase in total revenue year-over-year, amounting to $705 million.
The company's GAAP net profit attributed to ordinary shares saw a significant rise, reaching $80.6 million, a 62.2% increase from the previous year.
Waterdrop has maintained its profitability for the ninth consecutive quarter and has reiterated its financial guidance for sustained double-digit revenue growth for the full year.
Key Takeaways
- Total revenue for Q1 2024 hit $705 million, marking a 16.3% year-over-year increase.
- GAAP net profit attributed to ordinary shares surged by 62.2% year-over-year to $80.6 million.
- The company has been profitable for nine straight quarters.
- Waterdrop's insurance business grew with total FYP risk reaching $1.75 billion, a 3.7% year-over-year increase.
- Investment in R&D resulted in obtaining four LLM-related patents.
- The Medical Crowdfunding platform has collected $63.8 billion from 456 million donors for over 3.17 million patients.
- The healthcare business segment's revenue grew by 7.3% year-over-year to $25.3 million.
- Waterdrop continues to expand its digital capabilities and partnerships in healthcare.
Company Outlook
- Waterdrop's financial guidance for the full year remains consistent with expectations for double-digit revenue growth.
- The company will focus on optimizing product offerings and exploring new service models.
- Investments in AI technology are planned to enhance efficiency.
Bearish Highlights
- Operating costs and expenses have risen both year-over-year by 10.5% and quarter-over-quarter by 4%.
Bullish Highlights
- The company's insurance business and Medical Crowdfunding platform have shown steady growth.
- Waterdrop has expanded its healthcare-related business and digital capabilities.
- Strategic cooperation agreements with a leading domestic pharmaceutical company have been signed.
Misses
- There were no specific misses reported in the provided summary.
Q&A Highlights
- Waterdrop emphasized its deepened cooperation with pharmaceutical companies and CROs, including 7 of the top 10 globally.
- The company has won a bid for a clinical trial in the cell therapy field and initiated two key clinical trials.
- Continued expansion of digital multi-channel marketing in healthcare is a priority.
Waterdrop's robust financial performance in the first quarter of 2024 demonstrates the company's continued growth and profitability. With its diversified revenue streams from insurance, crowdfunding, and healthcare-related businesses, Waterdrop is well-positioned to maintain its upward trajectory.
The company's strategic investments in research and development, as well as partnerships with top pharmaceutical companies, underscore its commitment to innovation and service quality. As Waterdrop continues to build integrated solutions across the industry chain, the outlook for sustained growth remains positive.
InvestingPro Insights
Waterdrop Inc. has showcased solid financial results in Q1 2024, but a deeper dive into the company's performance and market position through InvestingPro metrics and tips provides a more nuanced view of its investment potential.
InvestingPro Data indicates a market capitalization of $509.14M, demonstrating a moderate size in its sector. With a P/E ratio that has adjusted to 21.66 from the last twelve months as of Q4 2023, Waterdrop trades at a valuation that reflects its current earnings. Furthermore, the company's gross profit margin stands strong at 54.55%, suggesting efficient management of its production costs and services pricing.
An InvestingPro Tip highlights that Waterdrop's management has been aggressively buying back shares, which often signals confidence in the company's future and can be a positive indicator for investors. Additionally, the company's liquid assets exceed short-term obligations, providing financial stability and the ability to manage short-term liabilities.
Waterdrop's price has seen a strong return over the last month, with a 1 Month Price Total Return of 18.97%. This performance, coupled with the fact that the company has been profitable over the last twelve months, can be appealing to investors looking for growth and profitability.
For those interested in more detailed analysis and additional InvestingPro Tips, which can provide further insight into Waterdrop's financial health and market performance, visit https://www.investing.com/pro. There are 6 more tips available that could help in making a more informed investment decision. And don't forget, you can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, to access exclusive data and insights that could give you an edge in the market.
Full transcript - Waterdrop ADR (WDH) Q1 2024:
Unknown Executive: Good morning, everyone. This is [ Tracy Lee ] from Waterdrop Investor Relations. It's [indiscernible] to welcome everyone to Waterdrop's First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.
Please note that discussion today will contain forward-looking statements made under safe harbor provisions of U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are factor to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but not limited to, those outlined in our public filings with the SEC. The company does not undertake any obligation to update any forward-looking statements, except as required any under applicable law. Also, this call includes discussion of certain [indiscernible]. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP.
Joining us today on the call are Mr. Yang Guang, Co-Founder, Director, [indiscernible] and GM of the International Business; Mr. [ Yang Wei ], Director and GM of Insurance Business; Mr. [indiscernible], Head of Finance; and Ms. [ Jasmine Lee ], [indiscernible] Secretary. We'll be happy to take some of the questions in the Mandarin line at the end of the conference call.
Unknown Executive: Hello, everyone. Thank you for joining us our first quarter 2024 earnings conference call. Since the beginning of 2024, the domestic economy remains on track for recovery, leading to a steady growth in personal insurance industry. For Waterdrop, the company continues to pursue high-quality development while improving our quality and efficiency.
In terms of our financial performance, total revenue of Q1 reached [ 705 million ], up 16.3% year-over-year. GAAP net profit attributed to the company reached [ 80.6 million ], a significant increase of [ 62.2% ] year-over-year. Since Q1 of 2022, we have continuously recorded profitability for 9 consecutive quarters.
In Q1, all our business segments maintained robust. For our Insurance Business, we actively optimize the product offerings, explore new service models and continue to see [ IGC ] empowerment. Insurance premiums significantly increased sequentially, representing an operating margin of over 20%.
For Waterdrop Medical Crowdfunding, we are actively participating in multi-label medical assistance system to continue improving service quality. Segment loss was further reduced.
For healthcare-related business, we continue to collaborate with domestic and international pharmaceuticals, expanding to a digital marketing solution [indiscernible]. During Q1, our revenue increased 7.3% Y-o-Y.
In the first quarter, we continued to invest in R&D. By now, we have obtained 4 LLM-related patents and submitted over 10 more patent applications. We are committed to improve efficiency in the entire insurance service group.
For our CSR and ESG efforts, Waterdrop is here to sustainable development in ESG management, implementation and as well as [indiscernible]. In the latest rating published by IGF, our rating increased to A-, requesting a great lift forwarding at ESG. As of the end of Q1, our charity platform has partnered with 112 [indiscernible] charity organization, [indiscernible] more than 15,000 projects. [indiscernible] one of multilevel medical assistance platform we joined was awarded to [ 2023 ] project of the year in [ 8 ] China Charity annual conference.
For the capital market, we recently paid our first special [indiscernible] since listing. We look forward to bring more value to our shareholders in the future.
Regarding share buyback, as of the end of May 2024, the company has cumulatively repurchased 45.5 million [indiscernible] in open market for a total consideration of about $95.9 million. The repurchased shares will continue to be used for ESOPs to motivate our talented team. This is a recap of our performance in Q1.
For the full year of 2024, Waterdrop financial guidance remains unchanged. First, profitable year with double-digit revenue growth; second, insurance operating margin above 8%; third, sustained growth in health care-related revenue. To achieve our goals, we will implement the following strategy.
For insurance business, we will adhere to our user first principle, further optimize to conversion, explore new service models and product innovation, invest in AI [indiscernible], driving business operations to improve efficiency for both ourselves and industry.
For Medical Crowdfunding, we will continue to take advantage of technology capability to ensure sustainable development while building social value and [indiscernible] user needs.
For health care business, we will swiftly move to the penetration revolve, expanding the comprehensive service capability to more [indiscernible] categories and actively exploring digital marketing to broaden business boundaries.
With [indiscernible] cash reserves, we're taking suitable partnership and M&A targets around insurance and health care sectors.
Looking ahead, the company will continue to strengthen its business value and its barriers that in by our mission and value, we'll continue to see more segmentation opportunities.
Now I will pass to [indiscernible] to discuss our insurance business in Q1.
Unknown Executive: Thanks, Jan. This quarter, our insurance business demonstrates steady growth. The total FYP risk at [ 1.75 billion ], increased by 3.7% year-over-year. Insurance-related income was [ 610 million ], up by 13.1% Y-o-Y. Operating profit for the insurance business reached [ 130 million ]. RRP for short-term insurance products was [ 1.15 billion ] in the first quarter, representing a sequential increase of [ 15.9% ]. [indiscernible] new policy FYP grew by 41.6% sequentially. We have continually incurred online traffic conversion and based on the user profile of each content distribution platform, we specifically optimized our product offering accordingly.
Our policy renewal rate remains at a high level, consistently above 95%, which indicates strong user recognition. [indiscernible] for long-term insurance products amounted to [ 600 million ] in Q1, representing a [ Q3 ] growth of 13.4%. The contribution of FYP generated for long-term insurance products to overall FYP would further increase.
The FYP of life insurance product to overall long-term products increased to 56.4%. [indiscernible] a sequential increase in productivity per capita by 6.4%, the overall quality of long-term policy further improved, with the first year retention rate increasing by 2 percentage points sequentially.
We continue to develop our offline brokerage business. In Q1, we launched our new brand of off-line brokers for [indiscernible], aimed to provide more comprehending offline service and strengthening our brand awareness. On [indiscernible], we got sequential increase in FYP and Waterdrop Insurance Marketplace at [indiscernible] really enhanced synergies in sales resources, content marketing and product partnerships.
Our capability in catering various products to meet user needs continue to improve. During this quarter, we launched [indiscernible], a long-term medical insurance product [indiscernible] for 20 years and aims to provide high-value coverage for senior, especially for seniors.
Our [indiscernible] disability income insurance for the elderly has exceeded [ 10 million ] in FYP for the first month they launched, reflecting a strong market demand.
Targeting the market segment, we have successfully upgraded one of our star products, [indiscernible] to [indiscernible] 2.0, which gained top recognition on various platform.
For people with previous existing conditions, we upgraded our [indiscernible] to over 0 waiting period and extended the [indiscernible] age up to 105 years old. The overall carrier insurance products achieved [ 100 million ] FYP during Q1, continuing to gain user trust.
Moving on to technology empowerment. In Q1, we continued to expand the application of our [indiscernible]. The accuracy and efficiency of our large language model has been significantly improved. Our AI broker has reached [ 98% ] of the average level of human broker in health insurance sector, capable of conducting independent dialogues with our clients for up to 40 minutes.
Meanwhile, on our AI copilot, which has been widely internally [indiscernible] reached an accuracy rate of over [ 98% ] in the insurance molecule rate, significantly boosting the efficiency of sales, quality controls and others.
We also actually explore external application to empower the industry, with several partnerships currently under negotiation. By now, we have obtained 4 LLM-related patents and submitted over 10 more patent applications.
Looking ahead, we will remain dedicated to positioning our results at the forefront. This concludes my remarks for today, and we now pass through [indiscernible] for an overview of Medical Crowdfunding and Health care business.
Unknown Executive: Thank you, [indiscernible]. As of the end of Q1 2024, around 456 million people [indiscernible] donated 63.8 billion to over 3.17 million patients through our Waterdrop Medical Crowdfunding.
We sustained focus on transparency and keep strengthening our risk management mechanism. For intent, before manual verification, we integrated algorithm [indiscernible] to identify false or fake medical documents and mitigate related risks risk effectively.
In addition, for patients with a high risk of [indiscernible] away with all of the donations are made in batches according to the stage of treatment, reducing the risk of fund misappropriation. We see in that the higher eccentricity we have, the greater the donor enthusiasm will be.
In the meantime, we constantly [indiscernible] user experience and constantly improve service quality. For urgent cases, we opened up an advanced payment application portal for patients. We have the risk control review. When patients need to withdraw the fund but 24 hours public notice period has ended, we will use our own funds as advanced payments. This ensures that the patients can promptly get the fund for their treatment.
During Q1, we actively participate in multilevel medical assistance programs initiated by local governments in China. In February, on International Rare Disease Day, Waterdrop launched the special rare disease care program on top of our existing support initiatives. By the end of Q1, more than 67,000 patients with rare disease have -- as will help through our Waterdrop Medical Crowdfunding [indiscernible] fund and received donation of more than [ CNY 1.5 billion ] from 48.9 million donors.
We contribute through our platform, the Waterdrop Medical Crowdfunding charitable bonds and collaboration with pharmaceuticals. We provide a fast track for rare disease patients to respond as well as dedicated consultants and [indiscernible] support. Waterdrop charity works with charity fund to help these patients seek medical resources at local medical insurance policy updated and so on. Through that, we'll continuously update our care initiatives for patients, bringing more hope to those in need.
In Q1, our health care-related business continued its momentum. We expanded our digital capabilities in [indiscernible] solutions and multichannel marketing solutions. For this quarter, health care-related income reached [ 25.3 million ], representing an increase of 7.3% year-over-year. The number of corporations, pharmaceuticals and CROs reached 179. And the number of new programs reached 88, both figures remain high level, leveraging a broad patient base and strong [indiscernible].
E-Find Platform continued to involve suitable candidates for our pharmaceutical clients. In Q1, E-Find Platform successfully enrolled over 800 patients. As of the date about 7,800 patients were enrolled. Our performance has been recognized by our clients. [indiscernible] intent in [indiscernible] products for global top 5 MNC. We work at exclusive Chinese third party patient recruitment partner and successfully enrolled over 60 patients within 3 months, which is 20% faster than the revenue time needed.
As we fulfill [indiscernible] for donations in the industry, we continue to deepen our cooperation with living pharmaceuticals and CROs, both domestically and internationally. We have already cooperated with 7 out of the global top 10 pharmaceuticals.
The CRO business continued to a steady development as our reputation and influence strengthen. We won a new bid for a clinical trial projecting the field of cell therapy for listing pharmaceutical in Q1. In addition, 2 key clinical trial version of our platform completed initiation in the first quarter, including the small long chain of new brand centers.
Looking ahead, we'll continue to explore financial digitalization in the health care sector. The platform will continue to build and improve integrated solutions across the entire industry chain.
In Q1, we further expanded the [indiscernible] of digital multi-channel marketing, leveraging our experience in patient management for chronic disease. We saw an increasing number of clients. The cooperation with MSCs [indiscernible] depends.
Meanwhile, we signed a strategic cooperation with the leading domestic pharmaceutical. We believe that Waterdrop will become the preferred partner in marketing for more and more pharmaceutical.
This now concludes my stage. Now I'll pass the call to [indiscernible], the Head of Finance, to discuss the company's financial performance.
Unknown Executive: Thank you, [ Jasmine ]. Hello, everyone. I will now walk you through our financial highlights for Q1. Before I go into details, please be reminded that all numbers quoted here will be in RMB. And please refer to our earnings release for detailed information on our financial performance on both the year-on-year and quarter-over-quarter basis, respectively.
We are thrilled to kick off 2024 with solid financial results. The company revenue in Q1 amounted to RMB 705 million, representing a Q-o-Q growth of [ 16.3% ]. The revenue structure is more diversified upwards, which the insurance-related income amounted to RMB 607 million. The crowdfunding business contributed revenue of RMB 67.4 million and the health care related income of about RMB 25.3 million, with all 3 business segments growing steadily.
At the same time, the company also continue to focus on operational efficiency, with overall operating costs and expenses of RMB 658 million, up 10.5% year-over-year and [ 4% ] quarter-over-quarter. Among them, Q1 operating costs were approximately RMB 331 million. Operating costs showed a year-over-year increase of 33.6% because of the consolidated [indiscernible], representing a sequential increase by 9.6%, mainly due to an increase in the referral and the receipts.
In terms of expenses, S&M expenses amounted to RMB 182 million, representing an increase of 5% and 4.2% on a Y-o-Y and Q-o-Q basis, respectively, which maintain a healthy and steadily trend, and benefiting our firm our effective cost control.
G&A expense amounts to RMB [ 89 million ], representing a decrease of 7.1% and 7.3% on a Y-o-Y and Q-o-Q basis. R&D expenses amounted to RMB 56 million. The decrease [indiscernible] due to the impact of team restructuring.
In Q1, our profitability improved significantly. Net profit attributable to the company's ordinary shares amounted to RMB 80.6 million, 62.2% year-over-year and [ 30.5% ] quarter-over-quarter. Since Q1 of 2022, we've continuously recorded profitability for 2 consecutive years. We generated a net cash inflow from our operating activities of RMB 179 million.
Looking ahead, we will continue to create value for our users and shareholders, with great profitability and growth.
And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.
Operator: Conference has now concluded. We thank you for attending today's presentation, and you may now disconnect.
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