Full Transcript: Waterdrop Q1 2026 Earnings Call

Waterdrop (NYSE:WDH) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below.

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Summary

Waterdrop Inc reported a total revenue of 1.24 billion yuan for Q1 2026, marking a 64.8% increase year-over-year, and maintained GAAP profitability for 17 consecutive quarters.

The insurance business saw a 74.1% year-over-year increase in related income, with an operating profit of 150 million yuan and a 13.3% operating margin.

The company is focusing on AI advancements, having filed 75 LLM-related patent applications and enhancing customer service and claims processes with AI tools.

Waterdrop Inc distributed a cash dividend totaling approximately $10.8 million and repurchased about 61.8 million ADS for $120 million as part of its capital return strategy.

The company aims for approximately 40% top-line growth in 2026, while increasing marketing investments to support long-term development.

Full Transcript

Tracy Lee (Investor Relations)

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. All participants are in listen only mode in our English line. 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. survey SECurities and Litigation Reform Act.

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 SEC. The Company does not undertake any obligation to update any forward looking statement except as required and applicable law. Also, this call includes discussion of certain NAND 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. Yuanlei, Director and GM of Insurance Business Ms. Xu Xiaoyin, Head of Finance Department and Ms. Li Jie Lu, Board Secretary. We will take questions in the monitoring line at the end of the conference call. Now let's invite our CEO Shen Peng 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 1.24 billion yuan, up 64.8% year over year and net profit attributable to ordinary shareholders of more than 98 million yuan. Since the first quarter of 2022, we have maintained GAAP profitability for 17 conSECutive quarters. By segment, our insurance business continues its user acquisition strategy with insurance related income at 74.1% year over year. As this capabilities have been validated, we sharpened our focus on user experience while continuing to optimize our traffic channels and user targeting efficiencies. The crusade 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 is sustained enrollment growth with more than 15,500 patients enrolled to date.

On 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 nine international ones, and were recently granted two more national invention patents in intelligence, semantic understanding and multimodal recognition. These technologies will be progressively applied to the insurance scenario 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 had repurchased approximately 61.8 million ADF in 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 Water Drop charity platform has partnered with 119 public charitable organizations and it launched over 15,000 and 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 investments 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 based extension will further support the company's long term development and that covers our overall performance in Q1. Next, I will walk through each of the business segments in detail. Hello everyone, this is Ganbe A. Let me walk you through the progress of insurance business. In the first quarter, insurance related income reached 1.15 billion at 74.1% year over year which with operating profit of 150 million yuan, the operating margin of Q1 is 13.3% the year over year.

Top line growth mainly reflects the continuation of last year user acquisition strategy. In the first quarter, we continue to set 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 product offerings which continue to earn user recognition. During this quarter, FIT from our pre existing position products rose 2024.3% year over year and the disability insurance products contribute 89 million in fit.

At the product level, we continue to iterate. For example, we upgraded our inclusive cancer worry free medical insurance service, 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 Shouhulu two focused cancer specified disease product with a singular health disclosure and a lower the bar to lifelong cancer protection. And on the service side, we took multiple steps to improve the customer experience.

We launched a dedicated customer complaint hotline to make it easier for users to raise concerns and we also connect the payment channels with our customer service system, extending frontline operation and enable faster refund processing. And for elderly customers, we simply find procedures for the children acting on their behalf and introduce a faster track service channel. Together this initiative upgrade our access hours service capability. We also continue to apply our LLM capabilities and AI tools to streamline the workflow and improve operating efficiency.

The user facing AI applications contributed approximately 87 million yuan in incremental premiums in Q1 Act 17 0.7% 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. Our frontline consultants Hua Yi AI had handled more than 10,000 underwriting inquiries to date. In in late March we began internal beta testing of the Clock Copilot on CRM and wecon, bringing together our product knowledge base create AI and other two agent tools so our consultants can get instant answers on product in writing and other common questions with less switching between the systems and documents. Grob Copilot also supports the self review, post track replay and refinement and performance analytics in after self 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 continues to deliver efficiency of more than twice the manual only basis this Baseline on the AI infrastructure side, our low code platform Waterdrop Digital 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 let's conclude our insurance business update for the first quarter. Thank you Rihanna Exitu and now I will walk you through our first quarter performance on our corresponding and healthcare businesses. As of the end of March 2026, approximately 494 million people had cumulatively donated a total of 73.5 billion to 3.75 million patients through the Watershed Medical Core founding platform. This quarter we pursued two priorities medical performing the AI capability viewing and better service in linguistic diverse regions for AI reviews.

We complete and quarterly upgrade evolving towards an AI assisted model without compromising risk control quality. Our risk model structured can structure the contain materials quickly and applies the preset rules for preliminary screening, shorten intake and the first task review and and free our risk specialists for complex cases. Secondly, we improve the service for patients 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 standard to their real needs.

We added minority language specialists to work alongside our existing campaign consultants on upfront consultation and the document guidance and the dispute resolution and reducing the communication cost caused by language barriers. In addition, we set up a dedicated service team in which the calculator and the risk control specialist 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 healthcare 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 EFINE platform single quarter patient enrollment rose 16% year over year and a newly signed project in this quarter increased 53% reflecting the wider partnership coverage and the deeper client engagement.

As of the end of the first quarter of 2006, the platform had cumulatively enrolled over 15,500 patients. In January 2019, 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 a matching engine across part of our service workflow. 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 capability.

We continue to build our case library, medical case library and complex indications in rare cases with a more balanced mix across therapeutic areas, strengthening the foundation for sustainable midterm to long term growth and that covers our core funding and healthcare businesses. Hello everyone, this is Xu Xiaoying. I will now take you through our financial headlines for the first quarter of 2006. Before I go into details, please be reminded that all members Korea 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's total revenue reached 1.24 billion, up 64.8% year over year, sustaining rapid growth as segment. The insurance related income contributed approximately 1.15 billion at 74.1% year over year while the non insurance business together accounted for about 7.8% of total revenue with corporate service fees of approximately 60.73 million and digital clean control solution income of approximately 24.2 million. Turning to cost, our total operating costs and census for this fourth quarter were approximately 1.16 billion.

At about 71.5% year over year, operating costs for this quarter reached 487 million. At 30.1% year over year driven by our business expansion, cost of referral and services increased by about 53.9 million, while Shopmaster service cost and personal cost rose by 38.9 million and 17.3 million respectively. Thousand marketing expenses reached 541 million, a significant increase from 172 million in the same period last year, mainly because we progressively scale up traffic investments over the past year and reinforce growth momentum.

Marketing expenses for clear quarter traffic channels rose by approximately $361 million year over year. General and administrative expenses were $71.7 million down 4.3% year over year mainly due to the lower professional services. This quarter, research and development expenses were about 62.7 million 11.55% year over year increase, primarily due to an approximately 6.7 million rise in core and cloud and technology and the technical services. For the first quarter, operating profit was around 79.95 million, a modest year of year increase of 5.3%.

However, affected by the net operating items in this quarter, the net profit attributable to all INIR shareholders was approximately 98.4 million down 9.1% year over year. As of the end of March 2026, the company maintained an AMBO cash reserve with cash and cash equivalent to short term investments and other cash position totaled about approximately 2.88 million 2.88 billion and on the capital returns since our IPO through May 1, 2026, we accumulated repurchase a total of approximately 61.8 million ADS for about US$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 first quarter orderdrop delivered 64.8% year over year. Revenue growth and by stepping up the investment in traffic and AI continues to strengthen our long term competitiveness and ladies and gentlemen, that will conclude today's conference call. Would you thank you for joining, have a good time.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.