BEIJING, Sept. 4, 2024 /PRNewswire/ -- Waterdrop Inc. ("Waterdrop", the "Company" or "we") (NYSE:WDH), a leading technology platform dedicated to insurance and healthcare service with a positive social impact, today announced its unaudited financial results for the three and six months ended June 30, 2024 and a special cash dividend.
Financial and Operational Highlights for the Second Quarter of 2024
Substantial growth in profit and positive operating cash flow: In the second quarter of 2024, net profit attributable to our ordinary shareholders reached RMB88.3 million, representing a year-over-year growth of 306.9%. As of June 30, 2024, we continued to generate positive operating cash flow during the second quarter of 2024.
Resilient revenue amidst industry challenges: For the second quarter of 2024, the first-year premiums ("FYP") generated through our insurance business amounted to RMB1,778.6 million (US$244.7 million), representing a decrease of 19.0% year over year. Net operating revenue was RMB676.2 million (US$93.0 million), representing a decrease of 0.4% year over year.
Improving margin of insurance segment: For the second quarter of 2024, the operating profit margin of insurance business increased year over year to 21.4%, compared with 16.7% for the same quarter of 2023.
Broadened crowdfunding coverage: As of June 30, 2024, around 461 million people cumulatively had donated an aggregate of RMB65.1 billion to 3.25 million patients through Waterdrop Medical Crowdfunding.
Digital clinical trial services in good progress: As of June 30, 2024, the Company had cumulatively enrolled nearly 8,600 patients into 1,050 clinical trial programs through the E-Find Platform.
Mr. Peng Shen, Founder, Chairman, and Chief Executive Officer of Waterdrop, commented, "During the second quarter of 2024, we delivered sound results in profitability. The quarterly net profit attributable to our ordinary shareholders reached RMB88.3 million, representing a significant year-over-year growth of 306.9%.
Our insurance business has shown sequential developments with FYP increasing by 1.4% quarter-over-quarter. We have continually improved online traffic conversion capabilities and efficiency, driving the number of new users to grow at 15.8%. At the same time, we have effectively sustained the policy renewal rate at high level.
Committed to investment in technology, we further piloted our Shuishou large language model, known as "Waterdrop Guardian", in multiple service scenarios covering medical, critical illness, and auto insurance categories. During the quarter, the Company initiated a strategic cooperation with a property & casualty (P&C) insurer. This is the first time we export a customized solution of non-life insurance and we look forward to empowering more industry partners with AI solutions.
We continually iterate service and business processes in medical crowdfunding to address user pain points. For instance, in regions populated by ethnic minorities, our platform now supports bilingual fundraising, aiding in the spread of cases within local communities and bolstered by AI-assisted bilingual case verification to minimize fraud.
During this quarter, our healthcare-related business maintained its growth, realizing a quarter-over-quarter growth of 4.1%. We collaborated with a total of 185 pharmaceutical companies and contract research organizations ("CROs"). Moreover, we enrolled more than 820 patients and initiated services for 88 new programs during the second quarter of 2024. We stay focused on digitalization trends in clinical trial and multichannel marketing solutions to serve a broader client base from this angle.
We are grateful for the ongoing support of our shareholders and investors, and prioritize shareholder interests and investor returns. The Company has actively carried out share repurchases for three consecutive years, and our board has recently approved a new annual repurchase plan. The repurchased shares will continue to be used in employee share incentive plans.
In addition, we also completed our first special cash dividend in the past quarter. We are pleased to announce that, with the board approval, the Company will soon start the second special cash dividend of approximately US$7.5 million."
Financial Results for the Second Quarter of 2024
Operating revenue, net
Net operating revenue for the second quarter of 2024 decreased by 0.4% year over year to RMB676.2 million (US$93.0 million) from RMB678.7 million for the same period of 2023. On a quarter-over-quarter basis, net operating revenue decreased by 4.1%. Net operating revenue generated by Shenlanbao(1) for the second quarter of 2024 was RMB40.4 million (US$5.6 million).
Insurance-related income includes insurance brokerage income and technical service income. Insurance brokerage income represents brokerage commissions earned from insurance companies. Technical service income is derived from providing technical services including customer relationship maintenance, customer complaint management, claim review, and user referral services, among other things, to insurance companies, insurance brokers, and agency companies. Our insurance-related income amounted to RMB573.8 million (US$79.0 million) in the second quarter of 2024, representing a decrease of 4.0% year over year from RMB597.4 million for the second quarter of 2023, which was mainly due to the decrease in FYP. On a quarter-over-quarter basis, insurance-related income decreased by 5.4%.
Crowdfunding service fees represent the service income earned when patients successfully withdraw the proceeds from their crowdfunding campaigns. Our role is to operate the Waterdrop Medical Crowdfunding platform to provide crowdfunding related services through the internet, enabling patients with significant medical bills to seek help from caring hearts through technology (the "medical crowdfunding services"). Our medical crowdfunding services generally consist of providing technical and internet support, managing, reviewing and supervising the crowdfunding campaigns, providing comprehensive risk management and anti-fraud measures, and facilitating the collection and transfer of the funds. For the second quarter of 2024, we generated RMB69.3 million (US$9.5 million) in service fees, representing an increase of 55.2% year over year from RMB44.7 million for the second quarter of 2023. On a quarter-over-quarter basis, crowdfunding service fees increased by 2.9%.
We are expanding the healthcare-related services, including digital clinical trial solution and digital multichannel marketing solution. Digital clinical trial solution income represents the service income earned from our customers mainly including biopharmaceutical companies and leading biotechnology companies. We match qualified and suitable patients for enrollment in clinical trials for our customers and generate digital clinical trial solution revenue for successful matches and we typically charge our customers a fixed unit price per successful match. Digital multichannel marketing solution income is derived from life science and healthcare companies. Focusing on the needs of our customers, we provide comprehensive digital marketing solutions around the whole life cycle of products through integrated services such as patient screening, medication management, doctor-patient services, innovative payment methods, and channel marketing. For the second quarter of 2024, our healthcare-related income amounted to RMB26.4 million (US$3.6 million), representing a decrease of 17.0% from RMB31.8 million in the same period of 2023. On a quarter-over-quarter basis, healthcare-related income increased by 4.2%.
Operating costs and expenses
Operating costs and expenses decreased by 13.4% year over year to RMB623.8 million (US$85.8 million) for the second quarter of 2024. On a quarter-over-quarter basis, operating costs and expenses decreased by 5.2%. Operating costs and expenses from Shenlanbao(1) for the second quarter of 2024 were RMB57.4 million (US$7.9 million).
Operating costs decreased by 4.2% year over year to RMB319.1 million (US$43.9 million) for the second quarter of 2024, as compared with RMB333.1 million for the second quarter of 2023, which was primarily driven by (i) a decrease of RMB12.9 million in costs of referral and service fees, (ii) a decrease of RMB8.6 million in the costs for patient recruitment consultants team, partially offset by (iii) an increase of RMB11.5 million in personnel costs mainly due to the consolidation of the financial results of Shenlanbao which incurred personnel costs of RMB16.9 million. On a quarter-over-quarter basis, operating costs decreased by 3.7% from RMB331.2 million, primarily due to a decrease of RMB9.9 million in costs of referral and service fees.
Sales and marketing expenses decreased by 23.0% year over year to RMB157.4 million (US$21.7 million) for the second quarter of 2024, as compared with RMB204.5 million for the same quarter of 2023. The decrease was primarily due to (i) a decrease of RMB38.0 million in marketing expenses to third-party traffic channels, and (ii) a decrease of RMB33.2 million in personnel costs and share-based compensation expenses, partially offset by (iii) the consolidation of the financial results of Shenlanbao which incurred sales and marketing expenses of RMB30.1 million. On a quarter-over-quarter basis, sales and marketing expenses decreased by 13.6% from RMB182.1 million, primarily due to (i) a decrease of RMB14.4 million in marketing expenses to third-party traffic channels, (ii) a decrease of RMB4.9 million in sales and marketing personnel costs and share-based compensation expenses, and (iii) a decrease of RMB2.7 million in outsourced sales and marketing service fees to third parties.
General and administrative expenses decreased by 2.1% year over year to RMB94.0 million (US$12.9 million) for the second quarter of 2024, compared with RMB96.0 million for the same quarter of 2023. The year-over-year variance was due to (i) a decrease of RMB5.5 million in personnel costs and share-based compensation expenses, (ii) a decrease of RMB8.4 million in professional service fees, partially offset by (iii) an increase of RMB12.6 million allowance for doubtful accounts. On a quarter-over-quarter basis, general and administrative expenses increased by 5.6% from RMB89.0 million, due to (i) an increase of RMB8.0 million allowance for doubtful accounts, partially offset by (ii) a decrease of RMB1.7 million in professional service fees.
Research and development expenses decreased by 38.5% year over year to RMB53.3 million (US$7.3 million) for the second quarter of 2024, compared with RMB86.7 million for the same period of 2023. The decrease was primarily due to a decrease of RMB35.3 million in personnel costs and share-based compensation expenses, partially offset by the consolidation of the financial results of Shenlanbao. On a quarter-over-quarter basis, research and development expenses decreased by 4.8% from RMB56.0 million, which was mainly due to a decrease of RMB2.8 million in research and development personnel costs and share-based compensation expenses.
Operating profit for the second quarter of 2024 was RMB52.4 million (US$7.2 million), as compared with an operating loss of RMB41.6 million for the second quarter of 2023 and an operating profit of RMB46.4 million for the first quarter of 2024.
Interest income for the second quarter of 2024 was RMB37.5 million (US$5.2 million), as compared with RMB37.6 million for the second quarter of 2023 and RMB39.8 million for the first quarter of 2024. The decrease was primarily due to the decrease in our short-term and long-term investments.
Income tax expense for the second quarter of 2024 was RMB7.0 million (US$1.0 million), as compared with an income tax benefit of RMB10.5 million for the second quarter of 2023 and an income tax expense of RMB8.6 million for the first quarter of 2024.
Net profit attributable to the Company's ordinary shareholders for the second quarter of 2024 was RMB88.3 million (US$12.1 million), as compared with RMB21.7 million for the same period of 2023, and RMB80.6 million for the first quarter of 2024.
Adjusted net profit attributable to the Company's ordinary shareholders (non-GAAP(2)) for the second quarter of 2024 was RMB108.7 million (US$15.0 million), as compared with RMB50.3 million for the same period of 2023, and RMB98.4 million for the first quarter of 2024.
Cash and cash equivalents and short-term investments
As of June 30, 2024, the Company had combined cash and cash equivalents and short-term investments of RMB2,933.3 million (US$403.6 million), as compared with RMB3,393.4 million as of December 31, 2023.
(1)
We started to consolidate the financial results of Shenzhen Cunzhen Qiushi Technology Co., Ltd. and its subsidiaries (collectively, "Cunzhen Qiushi", also known as "Shenlanbao") in the third quarter of 2023.
(2)
See the sections entitled "Non-GAAP Financial Measure" and "Reconciliations of GAAP and Non-GAAP Results" for more information about the non-GAAP measures referred to in this announcement.
Share Repurchase Programs
Pursuant to the share repurchase programs launched in September 2021, September 2022 and September 2023, respectively, we had cumulatively repurchased approximately 49.3 million ADSs from the open market with cash for a total consideration of over US$100.4 million as of August 31, 2024.
The board of the directors of the Company (the "Board") has approved a new share repurchase program whereby the Company is authorized to repurchase its own ordinary shares in the form of American depository shares with an aggregate value of up to US$50 million during the 12-month period through September 9, 2025. The Company expects to fund the repurchase out of its existing cash balance. The Company's proposed repurchase may be made from time to time in the open market at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on market conditions and in accordance with applicable rules and regulations. The timing and dollar amount of repurchase transactions will be subject to the Securities and Exchange Commission Rule 10b-18 and/or Rule 10b5-1 requirements. The Board will review the share repurchase program periodically, and may authorize adjustment of its terms and size or suspend or discontinue the program.
Special Cash Dividend
The Board has approved a special cash dividend of US$0.02 per ADS or US$0.002 per ordinary share to shareholders of record as of the close of business on October 11, 2024. The payment date is expected to be on or around November 5, 2024 for holders of ordinary shares and on or around November 8, 2024 for holders of ADSs.
Supplemental Information
We organize and report our business in three operating segments:
Insurance, which mainly includes Waterdrop Insurance Marketplace, Shenlanbao Insurance Marketplace and technical support service;
Crowdfunding, which mainly includes Waterdrop Medical Crowdfunding; and
Others, which mainly include Digital Clinical Trial Solution and other new initiatives.
The table below sets forth the segment operating results, with the six-month comparative figures retrospectively adjusted to conform to this presentation.
For the Three Months Ended
For the Six Months Ended
June 30, 2023
March 31, 2024
June 30, 2024
June 30, 2023*
June 30, 2024
RMB
RMB
RMB
USD
RMB
RMB
USD
(All amounts in thousands)
Operating revenue, net
Insurance**
597,437
606,777
573,832
78,962
1,133,780
1,180,609
162,457
Crowdfunding
44,677
67,350
69,323
9,539
86,699
136,673
18,807
Others
36,586
30,573
33,001
4,541
64,386
63,574
8,748
Total consolidated operating revenue, net
678,700
704,700
676,156
93,042
1,284,865
1,380,856
190,012
Operating profit/(loss)
Insurance**
99,759
129,163
122,955
16,919
254,714
252,118
34,693
Crowdfunding
(64,131)
(32,237)
(22,936)
(3,156)
(125,265)
(55,173)
(7,592)
Others
(47,877)
(31,432)
(27,450)
(3,778)
(84,444)
(58,882)
(8,103)
Total segment operating (loss)/profit
(12,249)
65,494
72,569
9,985
45,005
138,063
18,998
Unallocated item***
(29,393)
(19,130)
(20,205)
(2,780)
(76,319)
(39,335)
(5,412)
Total consolidated operating (loss)/profit
(41,642)
46,364
52,364
7,205
(31,314)
98,728
13,586
Total other income
52,835
42,781
38,366
5,280
89,606
81,147
11,166
Profit before income tax
11,193
89,145
90,730
12,485
58,292
179,875
24,752
Income tax benefit/(expense)
10,504
