Waterdrop Inc - ADR Stock

Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop Inc.'s Second Quarter 2026 Financial Results Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.

I would now like to turn the meeting over to Ms. Tracy Lee. Please proceed, Ms. Lee.

Thank you, operator. Dear investors and analysts, this is Tracy Lee from Waterdrop Investor Relations. Please note that discussion today will contain forward-looking statements made under the safe harbor provision of U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject 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 under applicable law.

Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP.

Joining us today on the call are Mr. Shen Peng, our Founder, Chairman and CEO; Mr. Ran Wei, Director and GM of Insurance Business; Mrs. Li Jieru, Finance VP, Head of Strategy and Capital Markets.

Certain members of our management team will deliver their remarks in Mandarin, followed by an English translation. Moreover, a webcast replay will be available on our Investor Relations website.

I will now turn the call over to our CEO, Shen Peng. Please go ahead.

Dear investors and analysts, thank you for joining Waterdrop's Second Quarter 2026 Earnings Conference Call. In this quarter, we maintained growth momentum and achieved a total revenue of CNY 1.45 billion, up 72.8% year-over-year and the net profit attributable to our ordinary shareholders of CNY 130 million. Since the first quarter of 2022, we have maintained profitability for 18 consecutive quarters.

Segment-wise, our insurance business continued to optimize user acquisition and conversion, driving 80.5% year-over-year revenue growth. Waterdrop Medical Crowdfunding had accumulated [indiscernible] medical funds for 3.82 million patients as of the quarter end. Our digital clinical trial solution business performed strongly with quarterly patient enrollment up over 50% year-over-year. This growth trend were underpinned by deep integration of AI across our core business scenarios. As of the end of June, the company has filed 88 large language model patents, including 10 of them overseas.

With strong performance and cash reserves, we continue to prioritize shareholder returns. Our Board recently approved 2 new initiatives. Firstly, the Board has approved a cash dividend of $0.03 per ADS or $0.003 per ordinary share payable to holders of record on October 9, 2026. The aggregate dividend payment is approximately $10.8 million with payments to be made in early November.

Second, the Board approved a share repurchase program of up to $50 million over the next 12 months. Since the initial program launched in 2021, we have repurchased approximately 62.9 million ADS for $121 million as of August 31, 2026.

The company remains committed to sustainable development and to getting back to society in meaningful ways. As of June 30, 2026, Waterdrop Charity platform has partnered with 119 public charitable organizations and launched more than 15,600 charity programs.

Waterdrop remains focused on growth and investment in core businesses. We expect our current incremental investment to continue translating into solid user base and future product potential. We always regard technology as a core driver of this company's growth. Today, our AI capabilities are actively expanded across the platform, enabling us to better capture growth opportunities in our existing businesses and further sharpen our competitive edge. At the same time, we are actively piloting new AI-driven initiatives for global markets and have made early progress in [indiscernible] markets. For full year of 2026, Waterdrop targets more than 40% year-over-year growth in total revenue and over 10% growth in operating profit.

This concludes our overview of Waterdrop's business performance. Now we will walk you through each of our business segments in more detail.

Hello, everyone. This is Ran Wei. Let me first update you on our insurance business. In the second quarter, insurance-related income reached CNY 1.33 billion, up 80.5% year-over-year and 15.4% quarter-over-quarter. Operating profit was CNY 180 million, up 20% from the previous quarter. With continued refinement in our AI-driven user insight and conversion capabilities, newly acquired customers rose 32.3% sequentially. The first year premiums of long-term insurance grew 33.4% sequentially as we capture market demand for insurance this quarter.

On the product side, our core strategy remains improving the affectability of insurance products. This quarter, we delivered several new products in line with this direction, including the launch of Rongyi Bao, the market's first long-term critical illness insurance product that requires no health disclosure and offers 5-year guaranteed renewability. We also expanded our Jixing Gaozhao product metrics, which now includes the market first specified disease insurance offering lifetime coverage with no health disclosure. During this quarter, products for users with pre-existing conditions contributed CNY 310 million FYP and disability insurance at CNY 84 million.

On the service side, we adopted differentiated scenario-based operations across customer touch points. In this quarter, AI applications across our user-facing interaction scenarios helped generating nearly CNY 100 million in FYP. Among them, AI Pro insurance generates FYP in millions each month. FYP facilitated by our AI Medical Insurance Expert rose by 25.6% sequentially. In WeCom scenario, we executed our strategies directly from the demand identification and user profiling to key moment engagement and batch operation contributing over CNY 10 million in FYP during this quarter.

Long-term insurance sales, the value of AI ultimately comes down to expanding what our life planners can do. As of quarter end, our underwriting assistant KEYI.AI had answered more than 13,000 underwriting questions. Since its launch, our AI Super Pre-Sales Assistant has constantly outperformed human life planners on annual premium per lead. And the number of users it served grew nearly 50% sequentially. Powered by multi-agent collaboration, our AI conversion model captures user preference from natural language interaction, turning them into durable profiles we can draw on over time and proactively surface topics tailored to each user, effectively extending the reach of every life planner we have.

That concludes our update on the insurance business for the second quarter.

Next, let me briefly update on Waterdrop Medical Crowdfunding and Healthcare businesses. As of the end of June 2026, Waterdrop Medical Crowdfunding had cumulatively contribution from around 499 million donors up to 3.82 million patients and raised a total of CNY 74.7 billion. This quarter, we continue to upgrade our AI driven risk control models, further improving asset concealment detection and sensitive identity detection. By combining semantic analysis of ID information, medical materials and user-generated content, the upgraded engine can better identify heating inconsistency and improve risk control efficiency.

In our health care business, our performance exceeding expectations across several key metrics. We enrolled more than 1,500 patients in this quarter, up 54% year-over-year and cumulative patient surpassing 17,000. Growth was driven by the higher matching efficiency and stronger enrollment capability. Oncology projects remain our core focus, while chronic disease projects are growing most of the sequential growth this quarter. Although chronic disease studies have a larger patient pool, they typically carry a high screening failure rates and place greater demand on matching precision and speed.

Chronic disease enrollment increased 80% year-over-year in the second quarter, further validating our enrollment ability in high screening failures enrolling. Meanwhile, our proven enrollment track record is translating into deeper and broader trust among patient partners. In this quarter, E-Find Platform signed 167 new products and the number of pharmaceutical companies and CROs we partnered with surpassed 255. Going forward, we will continue to optimize operational efficiency and work with our partners to advance digitalization across the clinical business progression.

This concludes our update on the Crowdfunding and Healthcare businesses.

Hello, everyone. This is Li Jieru. Next, I will walk you through our financial highlights for the second quarter of 2026. Before I go into details, please be reminded that all the 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-over-year and quarter-over-quarter basis, respectively.

In the second quarter of 2026, Waterdrop delivered net operating revenue of CNY 1,448 million, up 72.8% year-over-year, maintaining a strong growth momentum. Our insurance business contributed about CNY 1,333 million in revenue, representing an 80.5% increase year-over-year. Net insurance businesses accounted for around 7.9% of total revenue, including CNY 63.6 million from Medical Crowdfunding service fees and CNY 35.2 million from our digital clinical trial solutions.

Total operating costs and expenses came in at about CNY 1,337 million in the second quarter, up 80.5% year-over-year. Operating costs were CNY 537 million, increasing 29% year-over-year. The increase was primarily driven by business scale expansion, including an increase of around CNY 63.8 million in cost of referrals and service fees as well as an increase of CNY 21.4 million in short message service costs and CNY 11.2 million in personnel costs, respectively.

Sales and marketing expenses reached nearly CNY 638 million compared with CNY 199 million in the same quarter of 2025. The year-over-year increase mainly reflect -- the year-over-year increase mainly reflected our active step-up in public domain traffic investment with marketing expenses for third-party traffic channels increasing by about CNY 450 million and marketing-related professional technical service fees increasing by around CNY 21.8 million. G&A expenses were CNY 93.4 million, up 27.2% year-over-year, mainly due to an increase of CNY 33.3 million in allowance for credit losses. This was partially offset by decreases of nearly CNY 10.5 million in personnel costs and share-based compensation expenses.

R&D expenses were CNY 68.8 million, up 32.4% year-over-year. The increase was mainly driven by cloud server fees, token fees and other IT support expenses, which rose by about CNY 11.1 million as well as an increase of CNY 6.3 million in personnel costs and share-based compensation expenses.

For this quarter, operating profit reached about CNY 111 million, up 14.3% year-over-year and 39.2% quarter-over-quarter. However, due to tax-related items and nonrecurring gains and losses, net profit attributable to shareholders was around CNY 126 million, down 10.3% year-over-year, but up 27.9% quarter-over-quarter.

As of June 30, 2026, cash and cash equivalents, short-term investments and other cash positions totaled about CNY 2.653 billion. Our cash reserves maintains ample and provide solid support for both business investment and shareholder returns.

In terms of shareholder returns, since the launch of our first share repurchase program, we have cumulatively repurchased 62.9 million ADS for approximately USD 120 million as of August 31, 2026. And recently, the Board approved the sixth share repurchase program under which we plan to repurchase up to $50 million over the next 12 months and also approved the sixth cash dividend of approximately USD 10.8 million.

Overall, both the quality and scale of growth in our core businesses improved this quarter. The continued deployment of AI across every scenario in our business is becoming an important driver of efficiency gains. Meanwhile, we are expanding proactively while investing prudently in new initiatives in global markets, which for now have very limited impact on our current period financial results. As these initiatives reach a larger scale, we will keep the capital markets informed in a timely manner. In the future, the company will remain committed to disciplined strategic investments and continue creating long-term value for users and shareholders.

That concludes the company's financial results for the second quarter of 2026. We will now move on to the Q&A session.

[Operator Instructions] We now proceed to take our first question, and it comes from the line of Amy Chen of Citi. Her question is, in terms of the Mainland Chinese business in Hong Kong, media have reported that Mainland tax authorities may tax policy dividends. Has management seen any change either in the international business or domestic business?

Regarding recent market attention, our reading that what we are seeing reflects the enforcement of tax rules that have long been in place rather than a new policy specifically targeting Hong Kong insurance. In the near term, the media coverage have some effect on our customer sentiment as the differentated value of Hong Kong insurance products like multicurrency allocation, access to global health care resources and inheritance planning are clear and fundamental drivers of the Hong Kong insurance market has not changed.

Turning to the drivers of Mainland China insurance market today, the growth is driven by a rising health protection awareness, policy tailwinds for commercial health insurance, continued product innovation and the structural shift of household savings into long-term assets such as insurance in the current low interest rate environment.

Waterdrop serves as diversifying the customer base across multiple markets and multiple service models and our business mix remains solid, and we're confident in serving user demand wherever it rises.

We will now take our next question from [indiscernible] of CICC. The question is, we have noticed that several insurers have recently launched health insurance products targeting customers with preexisting conditions. How does management evaluate this opportunity in this category? And what is product strategy in this area?

As checkups become more common, the chronic illness and living with pre-existing conditions are far more typical. So a clean standard life is actually quite rare. And traditional health care insurance have a long focus on healthy lives and moving the people with pre-existing conditions still go unprotected. The industry consensus is clear, we're shifting from ensuring more healthy people to protecting the health of more people. This is both the real demand side opportunity and a clear path of commercial insurance expanding its coverage. And early practice with federal-level inclusive health plans, that logic is moving to more the commercial medical insurance, critical illness insurance, disability insurance and others. This is not simply diluting underwriting, it is segmenting the disease risk and building differentiated underwriting and claims. So the certain risk can actually be written and paid. For Waterdrop, lowering coverage threshold is central to our product strategy.

On the supply side, we break the demand down by scenario, age and condition, and co-design terms and coverage with our insurer partners. On the acquisition side, we use platform and AI insights to match the right products to the right customer. So people with pre-existing conditions can actually find something that works for them.

Longer term, our view is that health cover for people with pre-existing conditions can become more like auto insurance, people can actually buy it, claim on it and renew it. Accessibility and sustainability will have to move together.

We will now take our next two questions from [indiscernible] of Guotai Junan International. The question is, is there a clear time line for AI agent to start generating commercial value? And how will AI investment impact on R&D expenses ratio going forward? And what other new initiatives is the company currently exploring?

As previously introduced, our AI is planning across four value chains: acquisition, risk screening, and claims, and it grows series by stage. We are not commercializing AI as a strong stand-alone business and its value will show up in our top line growth and bottom line growth we deliver. And as we introduced earlier in the user targeting and conversion, our AI directly support the user computation and the purchase decision, giving nearly CNY 100 million in FYP.

And in our long-term insurance advisory tools like our KEYI.AI and our AI Pre-Sales Assistant can help our life planners work more efficiently and efficiently and close more cases. On our operation, our AI customer service and quality inspection application have fully absorbed the actual volume as we scale.

In our R&D side, the overall R&D ratio is stable, but we are actively shifting resources towards AI, both in the talent and in token cost. As usage scales, the spend will grow naturally, but we are disciplined about ROI under each scenario, and we will keep the overall ratio to a reasonable range.

And turning to our new initiatives, we are incubating a portable AI office assistant, a smart hardware product that leverage our AI know-how, in-house R&D and China's supply chain strength. It is in pilot sales across major global markets with some encouraging early feedback that said it's still an early stage and its financial impact is limited for now. And the experience we are gaining along the way, both for the business and for the company overall is generally valuable.

We will now take our next question from Kate Liu of UOB Kay Hian. Her question is, from product and supply perspective, which insurance category does the management view as having strongest growth potential?

There are two forces that reshaping our health insurance like the raising health protection awareness and aging population. So the market is shifting from standardized products to more tailored to actual needs. Demand driven coverage, including our insurance for pre-existing conditions, mid- to high-end medical insurance and products bundled with health management and elderly care services. A demand that traditional products never really served is being unlocked. We will keep building in this area. And this category play right into the strength we have built through our online platform. We can reach broadly and target precisely leveraging our AI capability and spot protection gap and specific customer groups, matching them with the right products and deliver better, faster service at the point of user consultation. So we will keep building on what we are uniquely good at.

Okay. We will now take our next question from [ Xinyu Mo ] of China Securities. The question is, noticing the strong growth in Q2, could you walk us through your recently customer acquisition investment outcomes and what we can expect on the cost side for the rest of 2026 and into 2027?

We are still in an investment circle in the user acquisition in Q2, and that speed is already show up in the numbers like insurance revenue and operating profit both grew further from the last quarter. And the new users were actually up more than 30% sequentially. This is a combined result of better reach out and conversion and product supply.

And in terms of the user acquisition strategy, we are -- actually we are not simply pursuing the cost reduction. What matters most for us is how we leverage AI capability to better align our product supply with our user profile and improving conversion efficiency. So currently, AI has been embedded across the entire process from our customer acquisition to service and is continually improving our efficiency across our core scenarios.

For the second half of 2026 and the full year 2027, our strategy direction remains consistent. We continue to expect to maintain an active user acquisition pace, exceeding our reach to target customer segments and broadening user acquisition coverage. And at the same time, we expect the user value generated by the current period acquisition to be gradually realized through renewals and upsells and cross-sells over the sequential user life cycle.

We have received no further questions online, and this concludes our Q&A session for today. Thank you to all the investors and analysts for joining us today.

Betsy, operator, back to you.

We are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect. Have a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, everyone. This is Tracy Lee from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's First Quarter 2026 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 the safe harbor provision of the U.S. Private Securities and Litigation Reform Act of 1995.

Forward-looking statements are subject 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 and applicable law.

Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP. Joining us today on the call are Mr. Peng Shen, our Founder, Chairman and CEO; Mr. Yang Li, Director and GM of Insurance Business; Ms. Xia, Head of Finance Department; and Ms. Li Wu, Board Secretary. We will take questions in the man line at the end of the conference call.

Now let's invite our CEO, Peng Shen to start.

Dear investors and analysts, thank you for joining Waterdrop's First Quarter 2026 Earnings Conference Call. In the first quarter, we continued our last year's growth momentum with total revenue of RMB 1.24 billion, up 64.8% year-over-year and net profit attributable to ordinary shareholders of more than RMB 98 million.

Since the first quarter of 2022, we have maintained GAAP profitability for 17 consecutive quarters. By segment, our insurance business continued its user acquisition strategy with insurance-related income up 74.1% year-over-year. As this capability has been validated, we sharpened our focus on user experience while continue to optimize our traffic channels and user targeting efficiencies.

The [indiscernible] business remains stable, having raised medical funds for cumulative 3.75 million patients by the end of the Q1. And our digital clinical trial solution business sustained enrollment growth with more than 15,500 patients enrolled to date.

On the technology front, we are accelerating our shift toward an AI native company. As of March 31, 2026, we had filed 75 LLM-related patent applications, including 9 international ones and were recently granted 2 more national invention patents in intelligence, semantic understanding and multimodal recognition.

This technology will be progressively applied to the insurance scenarios such as intelligent customer service and claims improving service quality and efficiency. On capital returns, we continue to share our growth with our shareholders.

In early May, we completed our fifth cash dividend since our IPO, totaling approximately $10.8 million. Our share repurchase program also continued steadily. By the end of May 2026, we have repurchased approximately 61.8 million ADS in the open market for about $120 million.

As of the end of May 2026, cumulative cash dividends and share repurchases since IPO has totaled approximately $170 million. Meanwhile, we remain committed to giving back to society. At the end of the Q1, the Waterdrop charity platform has partnered with 119 public charitable organizations and launched over 15,500 charity programs.

Looking ahead, we aim to seize industry opportunities and make growth our top priority this year. Building on our proven user targeting capabilities, we will increase marketing investment further. For 2026, we are targeting approximately 40% top line growth with operating profit scale is expected to remain broadly stable. We expect this current investment to unlock greater profit potential in the coming years. And the user base expansion will further support the company's long-term development. And that

covers our overall performance in Q1. Next, I will walk through each of our business segments in detail.

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Hello, everyone. This is [indiscernible] . Let me walk you through the progress of the insurance business. In the first quarter, insurance-related income reached RMB 1.15 billion, up 74.1% year-over-year with operating profit of RMB 150 million.

Operating margin of Q1 is 13.3%. The year-over-year top line growth mainly reflects the continuation of our last year user acquisition strategy. In the first quarter, we continued to step up public domain user targeting and increase our investment in traffic and AI, driving significant premium growth. And on a quarter-over-quarter basis, while the income declined, our insurance operating margin rose by 2 percentage points.

This was mainly because we proactively cut some lower ROI channels during this quarter. At the same time, we are actively expanding into other high-quality traffic channels while running our mature ones with refined operations, enhancing our traffic infrastructure and optimizing our model to drive continued improvement in ROI.

On the supply side, we are committed to giving users more diverse offerings product offerings, which continue to earn user recognition. During this quarter, FYP for -- from our pre-existing condition products rose 24.3% year-over-year and the disability insurance products contributed RMB 89 million in FYP.

At the product level, we continue to iterate. For example, we upgraded our inclusive cancer worry-free medical insurance business, expanding the coverage for out of the hospital prescription and related medical devices as well as a range of advanced cancer therapies. We also recently launched focused cancer specified disease product with a simpler health disclosure and lower the bar to lifelong cancer protection. On the service side, we took multiple steps to improve the customer experience. We launched a dedicated customer complaint top line to make it easier for users to raise concerns, and we also connect the payment channels with our customer service system, expanding frontline operation and enable faster response processing.

And for elderly customers, we simplify procedures for the children acting on their behalf and introduce a faster track service channel. Together, this initiatives upgrade our aftersales service capability. We also continue to apply our LLM capabilities and AI tools to streamline workflow and improve operating efficiency. The user-facing AI applications contributed approximately RMB 87 million in incremental premiums in Q1, up 17.7% sequentially through real-time support on our mini program, WeChat, phone calls and WeCom, including our AI Pro insurance and AI medical insurance experts, WeCom AI and other tools.

For our frontline consultants AI has handled more than 10,000 underwriting inquiries to date. In late March, we began internal beta testing of the Claude Copilot on CRM and WeCom, bringing together our product knowledge based [indiscernible] AI and other 2 agent tools. So our consultants can get instant answers on product underwriting and other common questions with less switching between the systems and documents. Copilot also supports the sales review, top track play and refining and performance analysis.

In aftersales service, our AI user service agent now in regular operation supports more than 1 million service interaction per month. And the AI service quality copilot continue to deliver efficiency of more than twice the manual basis baseline.

On the AI infrastructure side, our low-code platform, waterdrop.ai now offers more than 30 purpose-built agents, each tailored to a specific scenario for our internal team and external clients in all the user-facing work.

So that concludes our insurance business update for the first quarter.

Thank you, Ram. This is [indiscernible] And now next, I will walk you through our first quarter performance on our and health care business. As of the end of March 2026, approximately 494 million people had cumulatively donated a total of TWD 73.5 billion to 3.75 million patients through the Waterdrop Medical Crowdfunding platform. This quarter, we pursued 2 priorities for Waterdrop Medical Crowdfunding, AI capability building and better service in diverse regions.

For AI review, we complete an quarterly upgrade involving towards an AI-assisted model without compromising risk control quality. Our risk model structured can structure the campaign material quickly and apply the present rules for preliminary screening, shorten intake and first pass review and create our risk specialists for complex cases.

Secondly, we improved the service location in linguistically diverse communities, including areas where minority language are widely spoken. And this quarter, we systematically refined our service workflows and adapted the review standards to their real needs. We added minority language specialists to work alongside our existing campaign consultants on upfront consultation and the document guidance and dispute resolution and reducing the communication costs caused by language barriers.

In addition, we set up a dedicated service team in which the translator and the risk control specialists can track each case end-to-end and promptly resolve the bottlenecks, ensuring a strict risk control compliance while respecting local culture sensitivities.

Turning to our health care business. We sustained high-quality growth this quarter, broaden LLM application across the core business scenarios. We partnered with 243 pharmaceutical companies and CROs and initiated services for 128 new programs.

Our Eifund platform single quarter patient enrollment rose 16% year-over-year and the newly signed products in this quarter increased 53%, reflecting the wider partnership coverage and deeper client engagement. As of the end of the first quarter of 2026, the platform had cumulatively enrolled over 50,500 patients.

In January 2026, our intelligent drug patient matching technology secured a national invention patent, which is the first of this kind in China. This quarter, we focused on building up our upstream data structuring capability and connecting it with the matching engine. Across part of our service portfolio, the platform has now established a standardized pipeline from the data structuring to intelligent product matching, promptly generating suitability recommendation against the trial protocol.

Supported by this AI capabilities, we continue to build our case library, medical case library and complex indications and rare cancers with a more balanced mix across therapeutic areas, strengthening the foundation for sustainable mid-term to long-term growth. And that covers our corresponding and health care businesses.

And hello, everyone. This is [indiscernible] I will now walk you through our financial highlights for the first quarter of 2026. 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 year-over-year and quarter-over-quarter basis, respectively.

In the first quarter of 2026, Waterdrop total revenue reached RMB 1.24 billion, up 64.8% year-over-year, sustaining rapid growth segment, the insurance-related income contributed approximately RMB 1.15 billion, up 7.1% year-over-year, while the noninsurance business together accounted for about 70.8% of total revenue with service fees of approximately RMB 60.73 million and digital clinical trial solution income of approximately RMB 24.2 million.

Turning to cost. Our total operating cost and expenses for this first quarter were approximately RMB 1.16 billion, up about 1.5% year-over-year. Operating costs for this quarter reached RMB 487 million up 30.1% year-over-year, driven by our business expansion.

Cost of referral and services increased by about RMB 53.9 million, while short message service costs and personnel costs rose by RMB 38.9 million and RMB 7.3 million, respectively. Sales and marketing expenses reached RMB 541 million, a significant increase from RMB 172 million in the same period last year, mainly because we progressively scaled up traffic investments over the past year and reinforced growth momentum.

Marketing expenses for third quarter traffic channels rose by approximately RMB 361 million year-over-year. General and administrative expenses were RMB 71.7 million, down 4.3% year-over-year, mainly due to the lower professional service fees this quarter. Research and development expenses were about RMB 62.7 million, 11.5% year-over-year increase, primarily due to an approximately RMB 6.7 million rise in cloud and technical services.

For the first quarter, operating profit was around RMB 79.95 million, a modest year-over-year increase of 5.3%. However, affected by the net operating items in this quarter, the net profit attributable to ordinary shareholders was approximately RMB 98.4 million, down 9.1% year-over-year.

As of the end of March 2026, the company maintained an ample cash reserve with cash and cash equivalents, short-term investments and other cash position totaled about approximately 2.88 billion. And on the capital return since our IPO through May 1, 2026, we repurchased accumulated repurchased a total of approximately 61.8 million ADS for about USD 120 million and recently completed a cash dividend of approximately $10.8 million.

Overall, the growth momentum of our core business remains strong. And in the first quarter, Waterdrop delivered 64.8% year-over-year revenue growth and by stepping up the investment in traffic and AI continue to strengthen our long-term competitiveness.

And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

Good morning, everyone. This is Tracy Li from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's Fourth Quarter and Facial Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded.

Please note that discussion today will come from forward-looking statements made under the safe harbor provision of the U.S. Private Securities and Litigation Reform Act of 1995. Forward-looking statements are subject 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 in applicable law. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP.

Joining us today on the call are Mr. Shen Peng, our founder, Chairman and CEO; Mr. Ran Wei, Director and GM of Insurance Business; Mr. Xiaoying Xu, Head of Finance Department; and Mrs. Mrs. Jieru Li, Board Secretary. We'll be happy to take some of the questions [indiscernible] at the end of the conference call.

Now let's turn to our CEO, Shen Peng to start.

Dear investors and analysts, thank you for joining Waterdrop's fourth quarter and fiscal year 2025 earnings conference call. Looking back at 2025, we executed firmly on our AI plus insurance strategy, delivering tangible progress in both AI application and business growth. Our financial performance were robust. We saw significant top line and bottom line expansion, further solidify our core fundamentals.

For the fiscal year 2025, our revenue reached RMB 3.98 billion, up 43.5%, with our net profit attributable to ordinary shareholders reached RMB 570 million, registering a year-on-year growth of 64.8%. Notably, we met our guidance to the market and have now delivered GAAP profitability for 16 consecutive quarters. Our InterTech segment was as announced with revenue surging 51.3% and an operating margin of roughly 18%. Furthermore, our LLM integration significantly added the value of our medical performance platform. Our platform has responded for 3.68 million patients since it was launched. Our digital clinical trial solutions enrolled over 4,000 patients this year. Reflecting the strong performance in the second half of 2025, our Board approved our fifth cash dividend of $0.03 per ADS, totaling $10.8 million, this will be paid in late April to early May to shareholders of record as of April 24, 2026 U.S. ET time.

Meanwhile, our share repurchase remains on track with 60.7 million ADS repurchased for about $118 million for the end of 2026. On technology front, we are accelerating our shift to become an AI-native company. As of the end of year-end 2025, we filed a 72 LLM related patent applications. including 9 international ones. Throughout the year, we deployed the multi-modal AI agent sending text, voice and virtual interactions across all core workflows, from acquisition and conversation, sales, productivity and customer service through quality control and R&D. Every stage is now production-ready delivering measurable operating gains.

This capabilities are unified from under the Waterdrop Sea.AI, our company-wide platform for configuring scenario-specific agents, now also open to the industry partners. Beyond internet use, we are pioneering open collaboration for sectors here in our Waterdrop Guardian AI Copilot, which is called cloud server, built on a distributed architecture design, our cloud server enables a different AI agent to autonomously communicate and collaborate. Early demos have already validated its core workflow, seamless the multi-round dialogue and automated topic closure between AI agents.

In terms of ESG, we acquired with 119 organizations to sponsor over 15,500 projects, earning global recognition for our policy reduction efforts and upgrading our ESG rating to A+. As we enter our tenth anniversary in 2026, our goal is to move beyond just using AI tools to becoming truly AI-enabled company. We aim to visually reconstruct our entire value chain, embedding AI as a structural competitive advantage. We expect to sustain the momentum this year with moderately higher investment in marketing and AI, targeting double-digit growth in both revenue and profit.

Now I will pass to Wei Ran to introduce the development of insurance business.

Thanks, Shen Peng. In the fourth quarter, our insurance continued its strong momentum. Insurance related income surged 125% year-on-year to RMB 1.31 billion, while operating profit grew 42% year-over-year to RMB 160 million. On the traffic side, we have sharpened our real-time user identification, leveraging our self-deployed 50-millisecond data models, we can now capture potential user attributes with millisecond precision in high concurrency traffic. This allows for hourly health updates and rapid testing, which has significantly improved the accuracy of our high-quality traffic filtering and made a solid foundation for our FYT growth.

Regarding product supply, our market first has been launched version 2.0 this quarter, New zero deductible features now covers both projected long-term medical costs and routine medial expenses. Additionally, our pre-existing condition product gained strong traction with FIP at nearly 70%. While our disability insurance contributed about RMB 100 million FIP, validating our long-term strategy. Most importantly, AI is now embedded in every node of our service chain. On the user side, our AI Pro insurance engine on the mini-program drove 33% of sequential increase in premium, while our AI medial insurance experts generated over RMB 50 million in FIP at 145% quarter-over-quarter.

We have also expanded this AI capability to standard health products which can generate incremental mock premiums of over RMB 1 million. For human agent empowerment, our Life Planner copilot has cumulatively assisted in over 370,000 inquiries as of this quarter end. Our Waterdrop Sea.AI platform is now fully operational and having completed the fourth quarter roll out of the core module like workflow agents, batch testing and proactively test figures. This infrastructure powers our Xiao Bao AI Planner deployed across both the WeChat official accounts and mini programs to handle the product recommendations, business facilitation and user-agent matching, we have even opened the platform to our partners like insurers to uplift the industry-wide efficiency.

In after-sales our AI customer service agents handled over 1.4 million inquiries per month. They adopt our quality control copilot to report capital efficiency to 2.75 times that of the manual-only baseline. This concludes the insurance business update for the fourth quarter.

Now I will pass to Board of Secretary Jieru Li to introduce the progress of our medical crowdfunding and health care businesses.

Thank you, Wei Ran. As of end of 2025, approximately 490 million people have cumulatively donated a total of RMB 72.3 billion to 3.68 million patients through our Waterdrop medical crowdfunding platform. In this quarter, while maintaining robust platform governance and user experience, we strengthened risk control in 2 key areas to protect our users' privacy, we have fully upgraded our system with large language models capable of identifying sensitive data and applying dynamic data masking in real time.

So critical information frequently seen in their components like user ID numbers, bank accounts and the medical record IDs. We have moved from the manually redactions to automatically protection and masking. And this guarantees end-to-end securities for user data across our entire platform, fundamentally preventing any risk of information theft. Secondly, our content authenticity, we deployed a new model combining a medical knowledge graph with a credential validation. This system can cross-reference the clinical logic to precisely identify the fabricated risks, ensuring every donation to reach those patients who are truly in need.

On the user service front, we launched a standardized inquiry toolkit to bring fully clarity to our service scope, fee structures and contain guidelines. This initiatives reinforce our commitment to transparency and ensure our users are fully informed.

And moving to the Healthcare business, our E-Find platform is in high-quality growth, partnered with 224 pharmaceutical companies and enrolled in a record of 14,055 or 555 cumulative patients. Initiated 131 new programs. Once again, as we set up setting a new quarterly enrollment with record. This quarter, we achieved a major milestone that was proprietary [indiscernible] patient matching technology, the first of this kind in China was officially granted a national invention patent. By combining deep neural networks with natural language processing, our technology achieved end-to-end precision matching between patients and clinical trials. It uses rule-based filtering for structured data like age and lab results, while analyzing unstructured medical records against that helped criteria to uncover the hidden match. The dual engine approach strongly shrinks the weeks of the manually screening workloads down to minutes, strongly accelerating the clinical trial process.

And building on this, we significantly expand our accounts while continuing to grow our patient base in complex and rare cancer cases. Our revenue digital clinical trial revenue related to chronic disease 30% this quarter compared to the previous 3 quarters average. This strengthens the ability to tap multiple disease and departments and have made a solid foundation for our sustainable long-term growth.

And now I will pass to Xiaoying Xu, our Head of Finance department to discuss our financial performance in this quarter.

Thanks, Jieru. Hello, everyone. I will now walk you through our financial highlights for the fourth quarter and fiscal year 2025. Before I go into details, please be reminded that all numbers quoted here will be RMB and please refer to our earnings release for detailed information on our financial performance and both the year-on-year and quarter-over-quarter basis, respectively.

In the fourth quarter, our performance of accelerated significantly with quarterly revenue more than doubling year-on-year to RMB 1.41 billion, up 105.5%. For the full year 2025, revenue reached RMB 3.98 billion, up 43.5% year-on-year, concluding the year on strong note.

By segment, the insurance business within a stable cornerstone, with full year insurance-related income reaching approximately RMB 3.58 billion, up 51.3% year-on-year. The other segments accounted for about 10.1% of the total revenue, with medical crowdfunding performing services at RMB 260 million and with digital clinical trial sourcing income at RMB 118 million. Operating costs for the quarter reached RMB 680 million, up 109.2% year-on-year, driven by RMB 320 million increase in cost and the referral and service fees and RMB 26.8 million rise of SMS cost. Driven by rapid business expansion, operating costs and expenses in the fourth quarter rose to RMB 1.33 billion, up 109.4% year-on-year. For the full year operating cost and expenses increased 39.1% from 2024.

Though the pace of revenue growth, sales and marketing expenses was roughly RMB 510 million at 178.4% year-on-year with significant improvement in customer acquisition efficiency. The company proactively scaled up investments, resulting a roughly RMB 280 million year-on-year increase and marketing expenses for third-party traffic channels. G&A expenses were RMB 77.1 million, a modest year-on-year increase of 4.6%, mainly due to RMB 6. 7 million increase in allowance of party losses and RMB 5. 2 million in professional services, partially off setted by RMB 6.5 million reduction in personnel call.

Research and development expenses were approximately RMB 66.2 million at 21.9% year-on-year, primarily driven by a RMB 6.4 million increase in personnel costs and a RMB 5.8 million rise in cloud services. Company's profits improved significantly year-on-year. Net profit attributed to the company's ordinary shareholders for the quarter was RMB 162 million, up 62.7% year-on-year. For full year, the net profit attributable to the ordinary shareholders reached about RMB 570 million at 54.8%. The common maintained ample cash position of about RMB 3.25 billion as of the end of 2025, providing strong support for our future growth.

And this concludes our financial overview for the fourth quarter and fiscal year 2025. Now, ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, everyone. This is Tracy Li from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

Please note that discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities and the Litigation Reform Act of 1995.

Forward-looking statements are subject 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 and applicable law. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP.

Joining us today on the call are Mr. Ran Wei, Director and GM of Insurance Business; Ms. Xu Xiaoying, Head of Finance Department; and Ms. Jasmine Lee, Corporate Secretary. We'll be happy to take some of the questions in the Mandarin line at the end of the conference call.

In the third quarter, the company continued its growth trend with overall revenue reaching over CNY 970 million, up 38.4% year-on-year. Meanwhile, AI played a significant role in enhancing business quality and efficiency, driving net profit attributable to the ordinary shareholders to about CNY 160 million, a year-on-year increase of 60.1%.

For the first 3 quarters of 2025, the company's total revenue amounted to CNY 2.57 billion, up 23.1% year-on-year, while net profit attributable to ordinary shareholders reached about CNY 410 million, rising 51.9% compared to the same period last year. The company has maintained a GAAP profitability for 15 consecutive quarters since the first quarter of 2022.

By segment, backed by the full integration of AI, our insurtech business continued its solid performance with operating profit reaching about CNY 180 million in this quarter, a year-on-year increase of 44.8%.

The Medical Crowdfunding Platform maintained stable operations and has raised medical campaign for a cumulative total of 3.61 million patients as of the end of this quarter. The digital critical trial solutions business continued to excel in project fulfillment, enrolled over 1,000 patients in one single quarter, demonstrating robust growth momentum. This quarter, we continue to invest in AI. As of the end of September, the company has filed 69 patent applications centered on large language models, including nine international filings.

During this quarter, our intelligent chatbot has been upgraded to a new hybrid attention mechanism. This updated system can select the appropriate reasoning method more flexibly, making it better at understanding and handling long conversations. The inference throughput currently is double that of the original version.

In a key move to systematize our AI capabilities, we launched Waterdrop C- Point AI in late September, a low-code AI platform that empowers our employees to smoothly build and deploy tailored solutions for various tasks, such as marketing and customer service across apps, websites, and WeChat official accounts.

Going forward, we will also exploring its application in non-insurance areas, providing strong support for the company's growth. Waterdrop's grounded in sustainable development is dedicated to creating value for society. In the quarter, we updated our ESG measures, released the 2024 annual ESG report, and disclosed multiple new environmental data and continue to enhance our ESG governance framework.

In public welfare, as of September 30, 2025, Waterdrop Charity Platform has collaborated with 119 charities and launched more than 15,500 projects. Together with Guangzhou's Civil Affairs Bureau, we established the Waterdrop Co-Help program, which allows patients in need to apply for a visit online and offline, providing an innovative models that integrates government apps and individual campaigns.

We extend our appreciation to our shareholders for their enduring trust and support. In early November, we completed our fourth cash dividend distribution since IPO, with a total payout of around $10.9 million. By the end of November 2025, we had repurchased approximately 58.1 million ADS in the open market, totaling $113 million.

Building on our robust business performance, we are confident in exceeding full-year revenue and profit guidance. Moving forward, we will leverage advancing AI technologies to drive integration and innovation across our operations, fueling sustainable long-term growth.

Next, I will pass to Ran Wei to introduce the development of Insurance business in Q3.

Hi, everyone. This is an Ran Wei. In the third quarter, our Insurance business maintained significant growth momentum. Insurance-related revenue reached about CNY 870 million, increasing by 44.8% year-on-year and 17.8% quarter-on-quarter. The business achieved an operating profit margin of 20.3%. This quarter, we optimized our real-time identification capabilities in public traffic scenarios. At the data infrastructure level, we fully integrated the data links among advertising, operation, and risk control systems.

The integration slashed our end-to-end decision latency to under 50 milliseconds. Selection response speed allow us to generate more comprehensive decision-making and perform precise stratification immediately upon receiving an advertising requirement, thereby enhancing the ability to identify and filter high-quality traffic. As a proportion, we continue to increase through integration.

We also match users with suitable coverage options based on their specific needs and payment capability and the payment capacity. Now the entire system is deeply integrated with our corporate data lake and AI platform, including self-training and health updates to continually refine our marketing strategy.

On the supply side, we continue to drive product innovation. In this quarter, we introduced Quan Jia Fu Family Protection Plan, which covers up to nine family members under one single policy, and upgraded Guo Min Bao Mid-to-High-End Medical Insurance, with an expanded network of quality private hospitals.

For critical illness insurance, we further enriched our Shou Hu series by introducing modular options tailored to diverse budget needs. We also upgraded the Wu You Shou Hu disability insurance series and have achieved a comprehensive coverage ranging extensive protection.

Pre-existing condition insurance contributed about CYN 400 million in FIP during this quarter, a year-on-year increase of 103.9%. On the service side, we deploy AI more widely, enhancing operational efficiency. We expanded the rollout of AI Pro insurance model on our WeChat Mini Program homepage. This is LLM-powered model offers users real-time Q&A and personalized recommendations, driving a 36% sequential increase in facilitated FIP.

In Voice Services, AI medical insurance experts continue to boost the efficiency. In third quarter, it assisted in achieving an 82% increase in FIP compared to the Q2.

In the WeCom service scenario, the per-lead productivity of AI medical insurance experts in September doubled that of June. AI application also continued to empower long-term insurance services. As of the end of this quarter, the knowledge-base to AI life planner copilot had cumulatively assisted in over 340,000 insurance product-related consultations.

The underwriting assistant, KEYI.AI reduced the response time from underwriting cases for the traditional manual model of 5 minutes to 1 second. The AI super pre-sales assistant has consistently maintained higher APL than the human agents. And beginning in September, this scenario has been fully transitioned to AI operations.

In after-sales services, our AI customer service agent now can handle over 600,000 insurers in 1 month, solving 85% of online cases independently. At the end of September, we launched Waterdrop C-Point AI, a local platform that is accelerating the development of AI application across multiple business scenarios.

That concludes our insurance update in this quarter.

I'm, Lee Jasmine. Now, I will walk you through the third quarter progress in Crowdfunding and Healthcare sectors. As of September 30, 2025, approximately 485 million people had cumulatively donated a total of RMB 71.2 billion to 3.61 million patients through Waterdrop Medical Crowdfunding.

In the third quarter, we focused on strengthening the campaign risk control measures. We expand core scenarios strategically incorporating differentiated modification to our workflow, which boosted the efficiency of the review process.

By analyzing donation visit data to identify structural patterns, advanced analysts that now can refine the identification capabilities of our algorithm model. This, in turn, has improved automatic early warning systems to better detect and reduce fraud. Additionally, the platform continues prioritizing the transparency of campaign authenticity. This quarter, we fortified our special case review mechanism by fully deploying course of the request review and potential usage of funds, with real-time display review timeline and the reviewers' presentation status.

This now gives donors clear insight into how their contribution, how their donations are allocated and used. This narrative have profoundly enhanced the transparency rationality and traceability of fund distribution. And our healthcare business continued its strong performance this quarter.

The E-Find platform expanded collaboration network by partnering with 216 pharmaceutical and contract research organizations. Meanwhile, we initiated services for 125 new programs. For the first time, we successfully enrolled over 1,000 patients in one single quarter. Since its launch, the program has achieved a cumulative enrollment of more than 13,000 patients. Waterdrop leveraged its massive patient database and advanced digital ability to expand collaboration projects in areas like psoriasis, tumors and digestive tumors, accelerating clinical development process of our partners.

Notably, in the challenging field of gynecological tumor, quarterly enrollment increased by 130% compared to the previous 4-quarter average level. The company has also made significant strides in chronic disease, building on its existing focus on the like skin disease, respiratory conditions and psoriatic, hypertension, the company has expanded its disease coverage into the rheumatology and immunology.

Enhancing digital matching accuracy between patient database and project libraries remain a key strategic focus for Waterdrop. This quarter, we upgraded our algorithm medical data structure matching, enabling thriving performance across multiple high-quality, high difficulty projects.

Through the ecosystem synergy and refined project operations, Waterdrop consistently delivered satisfactory fulfillment quality, driving sustained order growth. As a result, digital clinical trial solution income in the third quarter reached RMB 31.85 million, marking a 31.3% year-on-year increase.

In the digital omnichannel marketing, we advanced LLM-powered application in medical patient service scenarios, launching projects in patient health management, knowledge promotion and digital humans. The company secured a 3-year contract with a world-leading pharmaceutical for patient medicine, serving hundreds of thousands of patients and profoundly improving service efficiency and user experience.

Now, I'll hand it over to Xiaoying Xu, our Head of Finance Department to discuss our financial performance in this quarter.

Hello, everyone. I will now walk you through our financial highlights for the third quarter of 2025. 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-on-quarter basis, respectively.

In the third quarter, the company reported total revenue of RMB 975 million, marking a year-on-year growth of 38.4%, reflecting a strong growth trajectory.

By segment, our Insurance business generated about RMB 870 million in revenue, up 44.8% year-on-year. Crowdfunding service fees stood at and at around RMB 65.66 million, remaining stable year-on-year and Digital Clinical Trial solutions contributed over RMB 31.85 million with a year-on-year increase of 31.3%.

Operating costs and expenses totaled approximately RMB 861 million, marking a year-on-year increase of 27.1%. This growth rate of operating cost was lower than the revenue growth, further boosting profitability.

Operating costs for this quarter reached RMB 475 million, up 39.5% year-on-year, driven by RMB 66.7 million rise in cost of referral and service fees, along with RMB 32.4 million and RMB 16.9 million increase in personnel costs and the cost of performing consultant fees.

Sales and marketing expenses amounted to RMB 243 million, rising 40.3% year-on-year. This was mainly because of the enhanced AI application, which improved the user identification accuracy and conversion rate. Based on this, we boosted our traffic investment, resulting in RMB 79 million year-on-year rise in the marketing expenses for the third-party traffic channel.

General and administrative expenses declined 23.7% year-on-year to RMB 84.7 million. Key factors include a RMB 15.6 million reduction in personnel costs and the absence of last year's RMB 20.6 million impairment loss, which contributed to the delta decrease.

The R&D expenses rose 10.2% to over RMB 58.3 million with personnel costs and cross-server expense and other technical support expenses increasing by RMB 3.2 million and RMB 2.7 million, respectively, compared to the same period of 2024.

In this quarter, the company reported an operating profit of nearly RMB 114 million, marking a substantial year-on-year increase of 329.8%.

Net profit attributable to the company's ordinary shareholders reached RMB 158 million, up 60.1% year-on-year. As of the end of this period, the company held ample cash position of about RMB 3.51 billion. Net operating cash flow remained positive, providing firm financial support for business expansion and technological development.

And in summary, during this quarter, we focused on refined management while achieving scale growth. Moving forward, the company will advance with greater productivity and programmatic and further strong act to reach a new stage of development.

And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, everyone. This is [ Tracy Li ] from Waterdrop Investor Relations. It's my pleasure to welcome everyone to Waterdrop's Second Quarter 2025 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 the safe harbor provision of U.S. Private Securities and the Litigation Reform Act of 1995. Forward-looking statements are subject 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 under applicable law. Also, this call includes discussion of certain non-GAAP measures. Please refer to our earnings release for a reconciliation between non-GAAP and GAAP.

Joining us today on the call are Mr. Shen Peng, our Founder, Chairman and CEO; Mr. Ran Wei, Director and GM of Insurance Business; Mrs. Xu Xiaoying, Head of Finance Department; and Mrs. Jasmine Lee, Corporate Secretary. We'll be happy to take some of the questions in the Mandarin line at the end of the conference call.

Good morning, everyone. This is Shen Peng. In the second quarter, we are pleased to see the integration of AI with the insurance and health care sectors began to deliver satisfying results. Revenue growth accelerated further with quarterly revenue reaching CNY 840 million, up 23.9% year-on-year. Powered by AI, the company has improved operational efficiency significantly, driving an 85.9% year-on-year increase in operating profit and lifting the operating margin by 3.9 percentage points.

Our InsurTech business leveraged technological innovation to bring inclusive protection for more users. Our Waterdrop Guardian AI application suite has been rolled out across customer acquisition, sales, underwriting, customer service, quality assurance and other key process. With that, FYP in Q2 increased 80% year-over-year and productivity per capita improved significantly. Waterdrop Medical Crowdfunding platform has also upgraded its risk assessment system by integrating large language model capabilities in case authenticity and transparency.

As of 30 June, it has raised Medical Crowdfunding medical funds for 3.54 million patients. With the market rebounding, the number of patients enrolled in our E-Find Platform also reached a historical high with nearly 1,000 patients were enrolled in the second quarter of 2025, where operations remain robust and improving. We keep improving our AI technology stack. Our self-development multi-agent collaboration framework can be reused a lot. They help us quickly build different types of agent chatbot and let AI agents collaborate within milliseconds. Thanks to this, we can provide more stable AI agents to handle more and more complex situations.

We also created proxy reward models and added the GRPO algorithm. This allows agents to break away from fixed scripts and change their communication strategies according to what customers do. To fix the slow responding issue when making AI agent calls, we use a distributed P-value cache. It significantly speed up the inference of the first token. As of June 30, the company has submitted 60 patent applications related to large language models with 9 of them filed outside international.

Our AI-driven business innovations were recently included in Harvard Business School's case collection, receiving recognition from the world renowned academic institutions. Based on these technologies, we will continue to expand the use of AI in our insurance and health care sectors, constantly creating value for our business and the industry.

The company also actively engaged in social return initiatives. As of June 30, 2025, our Waterdrop Welfare Platform has collaborated with 118 public charitable organizations. It has initiated over 15,500 public welfare projects. In July, it participated in the relief efforts for the flood disease in North China, providing assistance to the affected people through monetary and material donations. This year marks our ninth anniversary of the company's established. We are very grateful for the continuous support from our shareholders and investors over time.

The company has actively conducted share repurchase in the open market for 4 consecutive years. To keep repaying shareholders' trust, our Board recently approved 2 new initiatives. On one hand, we are pleased to announce that our Board has recently approved an enhanced cash dividend of $10.9 million, representing a 50% increase over the previous dividend. The dividend per ordinary share was $0.03 and the dividend per ADS will be $0.03. The Board has also authorized a fifth annual share repurchase plan. Since our first share repurchase program was launched in 2021, we have repurchased approximately 55.7 million ADS for $109 million as of August 31, 2025. Looking ahead, we will build on the current performance and make further efforts to achieve the business goals for the year of 2025 in the medium and long-term business development, striving to create more value for our stakeholders.

Next, I will now pass to Ran Wei to introduce the development of insurance business in Q2.

Thank you, Shen Peng. In Q2, our Insurance business delivered robust growth. The first year premium reached CNY 3.2 billion, up 80.2% year-over-year and 53.1% quarter-over-quarter. Insurance-related revenue was about CNY 740 million, up 28.7% year-over-year and 12.2% quarter-over-quarter. Operating margin improved to 23.1%, up by near 2 percentage points year-over-year, driving our -- driven by our deeper AI integration.

For [ short-term ] products, we increased investment in customer acquisition and technology, representing FYP to CNY 2.43 billion, up 95% year-over-year and 62.1% quarter-over-quarter. In customer acquisition, we continuously tap into AI capabilities, iterate on user outreach and recommendation AI models and drive continuous breakthrough in customer acquisition from the public domain.

We are increasingly applying AI tools to enhance the production speed and the quantity of marketing materials to support front-end customer acquisition efforts. At the same time, we utilized AI to facilitate better conversion of different scenarios. For example, our new AI Pro insurance model on the app and the mini program use large language model for real-time matching and convert nearly 50% better than the traditional advertisement slot.

In the voice service scenario, AI medical insurance experts continue to improve efficiency. In Q2, it assisted in achieving a 155% increase in the scale of insurance premiums compared to the Q1 and plan to continue expanding in the second half of the year. In WeCom scenario, AI medical insurance experts launched as of end of March and by June lifted FYP per lead 58% compared to that in May.

On products, we expanded our portfolio. We have new long-term medical plans such as [indiscernible], Xin Yi Bao, which requires no health declaration and guarantee renewal for 5 years. We also rolled out Huiminbao, a mid- to high-end plan with 0 deductible and nationwide eligibility and version 6.0 of our maternity insurance, “Jiehaoyun. We are the first in the market to accept expected mother with pre-existing conditions. Our products for people with preexisting conditions contributing a quarterly premium of CNY 300 million, a year-on-year increase of 146.6%.

In terms of long-term insurance, we actively explore the efficiency improvement of AI tools for online sales consultants and planners, which contributed to the long-term FYP reaching CNY 770 million, a year-on-year increase of 45.4% and sequential increase of 30.5%. With the assistance of AI tools, the productivity of traditional online sales team has achieved a double-digit growth both year-on-year and quarter-on-quarter and Shenlanbao independently contributed FYP of CNY 210 million. We've given online sales consultants and planners and insurance product knowledge-based query tool called Life Planner Copilot.

It's based on large language model. The model base has information on about 7,000 insurance products. It helps consultants search for relevant insurance contract terms in real time. In total, it has handled 300,000 insurance product-related consultations. After months of internal testing, we launched KEYI.AI at the end of August. Think of it as an insurance-focused DeepSeek. It delivers expert underwriting answers for every in-force product with industry-leading accuracy. And we plan to open the platform to our partners to accelerate AI adoption across the industry value chain.

Besides tools for agents, we have launched an AI super presales assistant, WeCom. It can receive customer consultation 24/7. It can figure out what customers' insurance needs and their intention to buy insurance on its own, match suitable products based on customers' situations and make an appointment with the most appropriate salesmen for them. According to the data since its launch, the AI assistant is more efficient than human assistance and has effectively improved the team's work efficiency.

On the supply side of long-term products, we keep pushing health insurance innovation. We kept refining our critical units line with EV health declaration and introduced the cost-effective [indiscernible] unit plan and rolled out no health declaration income protection insurance product. Besides disability insurance crossed over -- crossed CNY 100 million in quarterly FYP for the first time, underscoring a strong user acceptance.

Since its rollout at the end of March, our AI customer service agent has scaled rapidly, a voice support alongside text. In June alone, it handled 250,000 service sessions, leading first contact resolution rate. Online insurers now achieved 100% AI coverage. Meanwhile, in Q2, our AI quality control assistance boosted Q&A efficiency by 94% compared with traditional manual way. This concludes the insurance business update. Now I will hand over to our Board Secretary, Jasmine, to review our -- review Q2 progress in Waterdrop Crowdfunding and health care sectors.

Thank you, Ran Wei. As of the end of June 2025, around 480 million people cumulatively donated CNY 70 billion to about 3.54 million patients through our Waterdrop Medical Crowdfunding platform. Guided by [indiscernible], we again increased R&D investment on our personal medical crowdfunding risk controls. For case level risk, large language model metrics can now identify 15 high-risk scenarios like suspected identities, abnormal spending or ethical violations. It does this by analyzing every word in the campaign's contact, comments and hidden clues, which greatly improves the detective accuracy.

For fund level risk, a dynamic monitoring algorithm checks the diagnosed time line, commercial insurance payouts and the fundraising speed. If anything wrong with fund, it will automatically limit or pause the campaign. Then many review will be carried out within minutes. To address malicious promotion activities, we have developed an abnormal behavior recognition model. We incorporated crucial factors such as donation conversion rate, information dissemination patterns and assess characteristics. This model shows the top accuracy in the industry. This model can detect and stop the malicious campaign in real time.

On 27 May, we partnered with Guangzhou Civil Affairs Bureaucracy to launch the Waterdrop Co-Help. It is the first project under our new designation as a government endorsed platform that integrates social and public welfare resources. This project ensures that welfare resources can accurately reach the target population by integrating the system with [indiscernible]. At the same time, in place like Guangzhou Co-Help space and hospitals, the platform keeps improving its serviceability and actively responds to and explore the government enterprise collaboration innovation model.

Turning to our healthcare business. We continue to advance on steady and upward trajectory. Digital clinical trial business has entered a phase of rapid scale-up, coupled with efficiency gains. E-Find platform expanded its collaboration to 198 pharmaceutical and contract research organizations. Meanwhile, we initiated service for 114 new programs. The number of patients enrolled about reached -- also reached a historic high with 999 patients enrolled in Q2 of 2025, representing a 34.2% year-over-year revenue growth.

Our digital omnichannel marketing business also accelerated. We renewed our 3-year contract with a leading global multinational pharmaceutical. Through the application of AI in patient services and health education management, we achieved a 105% increase in productivity per capita, representing a substantial enhancement in our service capability.

Looking ahead, we will deepen our LLM capabilities and algorithmic precision to unlock further growth as healthcare digitalization vision accelerates. Now I will hand over to Xu Xiaoying, our Head of Finance Department to discuss our financial performance in this quarter.

Thank you, Jasmine. Hello, everyone. I will now walk you through our financial highlights for the second quarter of 2025. 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-over-year and quarter-over-quarter basis, respectively.

On the basis of steady growth in the previous quarter, the company has further achieved significant year-on-year and quarter-on-quarter growth in both revenue and profit this quarter. As Shen Peng and Jasmine just mentioned, the further development of company's AI application will improve the efficiency of our business operation in multiple aspects, including customer acquisition, sales, service and quality control, providing strong motivation for the performance growth in the second quarter.

In Q2, Waterdrop achieved remarkable financial results with both -- with the total revenue amounted to RMB 838 million, representing a year-on-year increase of 23.9% and a quarter-on-quarter increase of 11.2%. By segment, the insurance business contributed RMB 739 million, showing a year-on-year increase of 28.7%. The corresponding service fees generated RMB 67.4 million, remaining stable on year-on-year.

The digital clinical trial solutions yielded RMB 27.7 million with a year-on-year increase of 34.2%. Meanwhile, the company has been making its operation more efficient. In second quarter, the total operating costs and expenses were around RMB 741 million, which is about 18.7% higher than the same period last year as the growth rate of the costs and expenses was lower than that of the revenue. This quarter, the operating cost was RMB 416 million, a 30.5% increase from last year. This was mainly because the cost of referral and service fee went up by about RMB 73.4 million this quarter.

Also during this quarter, the company made additional efforts in Medical Crowdfunding to assist and have more users. Moreover, as the company has been enhancing its AI capability to attract more users during this quarter, it acquired users while consuming both efficiency and user experience. The sales and marketing expenses amounted to RMB 199 million, representing a 26.3% increase compared to last year. This is primarily due to an increase of RMB 44.3 million in marketing expenses for third-party traffic channels.

General and administrative expenses decreased by 21.9% year-over-year to RMB 73.4 million for the second quarter of 2025. This was primarily because the company tightened its operational control and the allowance for credit losses were RMB 13.4 million less than the last year.

The R&D expenses were RMB 51.9 million, remaining stable for the same period of last year. In the future, we will continue to pool resources to accomplish major cost adjust -- the internal structure of R&D expenses and allocate more resources to the AI capabilities building.

In terms of the operating profit in Q2, the company's operating profit reached RMB 97 million, showing a high year-on-year growth of 85.9%. The operating profit margins of the company as a whole and the insurance business has both further improved. Net profit attributable to the company's ordinary shareholders reached RMB 140 million, up 58.7% year-over-year. As of 30 June 2025, we held RMB 3.4 billion in cash reserves with operating cash flow remaining -- operating cash flow remained positive, providing a solid foundation for continued growth and strategic investment.

In conclusion, Waterdrop's excellent performance in this quarter further demonstrates its robust operational capability and the effective synergy among its diverse business segment. Looking ahead, we will continue to leverage technology and AI to expand our user base. At the same time, we will optimize our operations to enhance efficiency, thereby facilitating the stable growth of business revenue and profits. Additionally, we will persist in creating long-term value for shareholders and society.

And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for joining. Have a good time.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]