Waterdrop Inc. Announces First Quarter 2024 Unaudited Financial Results

BEIJING, June 5, 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 months ended March 31, 2024.

Financial and Operational Highlights for the First Quarter of 2024

• Consecutive profitability and positive operating cash flow: In the first quarter of 2024, net profit attributable to our ordinary shareholders reached RMB80.6 million, representing a quarter-over-quarter growth of 36.5%. As of March 31, 2024, our cash and cash equivalents and short-term investments balance amounted to RMB3,484.4 million (US$482.6 million). We continued to generate positive operating cash flow during the first quarter of 2024.
• Robust business performance: For the first quarter of 2024, the first-year premiums ("FYP") generated through our insurance business amounted to RMB1,754.5 million (US$243.0 million), representing an increase of 3.7% year over year. Net operating revenue was RMB704.7 million (US$97.6 million), representing an increase of 16.3% year over year.
• Improving FYP share from life insurance products: The contribution of FYP generated from long-term insurance products to overall FYP has further increased. In addition, in the first quarter of 2024, the FYP generated from life insurance products increased 9.9 percentage points to 56.4% of overall long-term insurance products from 46.5% for the same period of 2023.
• Broadening crowdfunding coverage: As of March 31, 2024, around 456 million people cumulatively had donated an aggregate of approximately RMB63.8 billion to over 3.17 million patients through Waterdrop Medical Crowdfunding.
• Digital clinical trial services in good progress: As of March 31, 2024, the Company had cumulatively enrolled nearly 7,800 patients into over 960 clinical trial programs through E-Find Platform.

Mr. Peng Shen, Founder, Chairman, and Chief Executive Officer of Waterdrop, commented, "We are thrilled to kick off 2024 with solid first quarter financial results. The quarterly net profit attributable to our ordinary shareholders reached RMB80.6 million, representing a quarter-over-quarter growth of 36.5%. We are also pleased to have maintained profitability for nine consecutive quarters.

Waterdrop Insurance Marketplace has continually improved online traffic conversion capabilities and efficiency. We have been leveraging various content distribution platforms and optimizing our product offerings accordingly. Our capability in tailoring various products to meet user needs continues to improve. Targeting a market segment, we have successfully upgraded one of our star products "Jiehaoyun" to version 2.0, which gained top recognition on various platforms. The FYP generated through our insurance business increased by 15.0% sequentially. Meanwhile, we have effectively sustained the policy renewal rate at above 95%.

Regarding Waterdrop Medical Crowdfunding, we ensured stringent oversight over the transparency of fundraising activities on our platform and strengthened our risk management measures. For instance, before manual verification, we integrated algorithm recognition to identify false or fake medical documents and mitigate related risks effectively.

In this quarter, our healthcare-related business continued its momentum, bringing the number of collaborating pharmaceutical companies and contract research organizations (collectively, "CROs") to 179. In addition, we enrolled over 800 patients and started providing services to 88 new programs in the first quarter of 2024. We accelerated the implementation of our digital capabilities in clinical trial solution and multichannel marketing to serve a broader client base.

Looking ahead, we are committed to patiently building core technology competitiveness for the Company, supporting the long-term strategic execution to maintain stable profitability. Guided by our mission and values, we will continuously explore more customized, cost-effective products and services, while expanding our business boundaries."

Financial Results for the First Quarter of 2024

Operating revenue, net

Net operating revenue for the first quarter of 2024 increased by 16.3% year over year to RMB704.7 million (US$97.6 million) from RMB606.2 million for the same period of 2023. On a quarter-over-quarter basis, net operating revenue increased by 6.9%. 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. Net operating revenue generated by Shenlanbao for the first quarter of 2024 was RMB59.7 million (US$8.3 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 RMB606.8 million (US$84.0 million) in the first quarter of 2024, representing an increase of 13.1% year over year from RMB536.3 million for the first quarter of 2023, which was mainly due to the increase in insurance brokerage income. On a quarter-over-quarter basis, insurance-related income increased by 3.2%.
  
  
• 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 first quarter of 2024, we generated RMB67.4 million (US$9.3 million) in service fees, representing an increase of 60.3% year over year from RMB42.0 million for the first quarter of 2023. On a quarter-over-quarter basis, crowdfunding service fees increased by 68.3%.
  
  
• 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 first quarter of 2024, our healthcare- related income amounted to RMB25.3 million (US$3.5 million), representing an increase of 7.3% from RMB23.6 million in the same period of 2023. On a quarter-over-quarter basis, healthcare- related income decreased by 8.3%.

Operating costs and expenses

Operating costs and expenses increased by 10.5% year over year to RMB658.3 million (US$91.2 million) for the first quarter of 2024. On a quarter-over-quarter basis, operating costs and expenses increased by 4.0%. Operating costs and expenses from Shenlanbao was RMB63.1 million (US$8.7 million).

• Operating costs increased by 33.6% year over year to RMB331.2 million (US$45.9 million) for the first quarter of 2024, as compared with RMB248.0 million for the first quarter of 2023, which was primarily driven by (i) an increase of RMB13.8 million in personnel costs mainly due to the consolidation of the financial results of Shenlanbao which incurred personnel costs of RMB17.2 million, and (ii) an increase of RMB66.0 million in costs of referral and service fees. On a quarter-over-quarter basis, operating costs increased by 9.6% from RMB302.1 million, primarily due to an increase of RMB29.7 million in costs of referral and service fees.
  
  
• Sales and marketing expenses increased by 5.0% year over year to RMB182.1 million (US$25.2 million) for the first quarter of 2024, as compared with RMB173.4 million for the same quarter of 2023. The increase was primarily due to (i) the consolidation of the financial results of Shenlanbao which incurred sales and marketing expenses of RMB34.2 million, (ii) an increase of RMB6.4 million in outsourced sales and marketing service fees to third parties, (iii) an increase of RMB4.1 million in marketing expenses to third-party traffic channels, partially offset by (iv) a decrease of RMB37.0 million in personnel costs and share-based compensation expenses. On a quarter-over-quarter basis, sales and marketing expenses increased by 4.2% from RMB174.8 million, primarily due to (i) an increase of RMB18.3 million in marketing expenses to third-party traffic channels, (ii) an increase of RMB5.8 million in outsourced sales and marketing service fees to third parties, partially offset by (iii) a decrease of RMB17.3 million in sales and marketing personnel costs and share-based compensation expenses.
  
  
• General and administrative expenses decreased by 7.1% year over year to RMB89.0 million (US$12.3 million) for the first quarter of 2024, compared with RMB95.8 million for the same quarter of 2023. The year-over-year variance was due to (i) a decrease of RMB12.7 million in personnel costs and share-based compensation expenses, and partially offset by (ii) an increase of RMB8.6 million allowance for doubtful accounts. On a quarter-over-quarter basis, general and administrative expenses decreased by 7.3% from RMB96.0 million, due to (i) a decrease of RMB13.5 million allowance for doubtful accounts, partially offset by (ii) an increase of RMB4.4 million in professional service fees, and (iii) an increase of RMB3.1 million in personnel costs and share-based compensation expenses.
  
  
• Research and development expenses decreased by 28.8% year over year to RMB56.0 million (US$7.8 million) for the first quarter of 2024, compared with RMB78.7 million for the same period of 2023. The decrease was primarily due to a decrease of RMB26.3 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 6.4% from RMB59.8 million, which was mainly due to a decrease of RMB3.9 million in research and development personnel costs and share-based compensation expenses.

Operating profit for the first quarter of 2024 was RMB46.4 million (US$6.4 million), as compared with RMB10.3 million for the first quarter of 2023 and RMB26.6 million for the fourth quarter of 2023.

Interest income for the first quarter of 2024 was RMB39.8 million (US$5.5 million), as compared with RMB30.9 million for the first quarter of 2023 and RMB34.7 million for the fourth quarter of 2023. The increase was primarily due to the increase in our short-term and long-term investments and interest rate.

Income tax expense for the first quarter of 2024 was RMB8.6 million (US$1.2 million), as compared with an income tax benefit of RMB2.6 million for the first quarter of 2023 and an income tax expense of RMB15.2 million for the fourth quarter of 2023.

Net profit attributable to the Company's ordinary shareholders for the first quarter of 2024 was RMB80.6 million (US$11.2 million), as compared with RMB49.7 million for the same period of 2023, and RMB59.1 million for the fourth quarter of 2023.

Adjusted net profit attributable to the Company's ordinary shareholders for the first quarter of 2024 was RMB98.4 million (US$13.6 million), as compared with RMB96.4 million for the same period of 2023, and RMB74.7 million for the fourth quarter of 2023.

Cash and cash equivalents and short-term investments

As of March 31, 2024, the Company had combined cash and cash equivalents and short-term investments of RMB3,484.4 million (US$482.6 million), as compared with RMB3,393.4 million as of December 31, 2023.

Share Repurchase Programs

Pursuant to the share repurchase programs launched in September 2021, September 2022 and September 2023, respectively, we had cumulatively repurchased approximately 45.5 million ADSs from the open market with cash for a total consideration of approximately US$95.9 million as of May 31, 2024.

Supplemental Information

Starting from the second quarter of 2023, our chief operating decision maker starts to manage the business by three operating segments and assess the performance and allocate resources under the new operating segment structure.

Therefore, 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.

As a result, we have updated our segments reporting information to reflect the new operating and reporting structure.

Comparative figures were retrospectively adjusted to conform to this presentation.

													For the Three Months Ended
													March 31, 2023		December 31, 2023		March 31, 2024
													RMB		RMB		RMB		USD
													(All amounts in thousands)
Operating revenue, net
Insurance *													536,343		587,866		606,777		84,038
Crowdfunding													42,022		40,013		67,350		9,328
Others													27,800		31,485		30,573		4,234
Total consolidated operating revenue, net													606,165		659,364		704,700		97,600
Operating profit/(loss)
Insurance *													154,955		128,223		129,163		17,889
Crowdfunding													(61,134)		(51,718)		(32,237)		(4,465)
Others													(36,567)		(27,078)		(31,432)		(4,354)
Total segment operating profit													57,254		49,427		65,494		9,070
Unallocated item **													(46,926)		(22,788)		(19,130)		(2,649)
Total consolidated operating profit													10,328		26,639		46,364		6,421
Total other income													36,771		44,463		42,781		5,926
Profit before income tax													47,099		71,102		89,145		12,347
Income tax benefit/ (expense)													2,626		(15,164)		(8,588)		(1,189)
Net profit													49,725		55,938		80,557		11,158
* The Company started to consolidate the financial results of Shenlanbao since July 4, 2023 and reported the results of Shenlanbao under the Insurance segment.
** The share-based compensation represents an unallocated item in the segment information because our management does not consider this as part of the segment operating performance measure.

Exchange Rate

This announcement contains translations of certain RMB amounts into U.S. dollars ("USD" or "US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB7.2203 to US$1.00, the noon buying rate in effect on March 29, 2024 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.

Non-GAAP Financial Measure

The Company uses non-GAAP financial measure, adjusted net profit attributable to our ordinary shareholders, in evaluating the Company's operating results and for financial and operational decision-making purposes. Adjusted net profit attributable to our ordinary shareholders represents net profit attributable to our ordinary shareholders excluding share-based compensation expense attributable to our ordinary shareholders and foreign currency exchange gain or losses. Such adjustments have no impact on income tax.

The non-GAAP financial measure is not presented in accordance with U.S. GAAP and may be different from non-GAAP methods of accounting and reporting used by other companies. The non-GAAP financial measure has limitations as analytical tools and when assessing the Company's operating performance, investors should not consider it in isolation, or as a substitute for net loss or other consolidated statements of comprehensive loss data prepared in accordance with U.S. GAAP. The Company encourages investors and others to review its financial information in its entirety and not rely on a single financial measure. Investors are encouraged to review the Company's historical non-GAAP financial measure to the most directly comparable GAAP measure. Adjusted net profit attributable to our ordinary shareholders presented here may not be comparable to similarly titled measure presented by other companies. Other companies may calculate similarly titled measure differently, limiting its usefulness as a comparative measure to our data.

The Company mitigates these limitations by reconciling the non-GAAP financial measure to the most comparable U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance.

For more information on the non-GAAP financial measure, please see the table captioned "Reconciliation of GAAP and Non-GAAP Results" set forth at the end of this press release.

Safe Harbor Statement

This press release contains statements that may constitute "forward-looking" statements pursuant to the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "aims," "future," "intends," "plans," "believes," "estimates," "likely to" and similar statements. Among other things, quotations in this announcement, contain forward-looking statements. Waterdrop may also make written or oral forward-looking statements in its periodic reports to the SEC, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Waterdrop's beliefs, plans and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Waterdrop's mission, goals and strategies; Waterdrop's future business development, financial condition and results of operations; the expected growth of the insurance, medical crowdfunding and healthcare industry in China; Waterdrop's expectations regarding demand for and market acceptance of our products and services; Waterdrop's expectations regarding its relationships with consumers, insurance carriers and other partners; competition in the industry and relevant government policies and regulations relating to insurance, medical crowdfunding and healthcare industry. Further information regarding these and other risks is included in Waterdrop's filings with the SEC. All information provided in this press release is as of the date of this press release, and Waterdrop does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Conference Call Information

Waterdrop's management team will hold a conference call on June 5, 2024 at 8:00 AM U.S. Eastern Time (8:00 PM Beijing/Hong Kong Time on the same day) to discuss the financial results. Dial-in details for the earnings conference call are as follows:

International:	1-412-317-6061
United States Toll Free:	1-888-317-6003
Hong Kong Toll Free:	800-963976
Hong Kong:	852-58081995
Mainland China:	4001-206115
Chinese Line (Mandarin) Entry Number:	8399398
English Interpretation Line (Listen-only Mode) Entry Number:	0418783

Participants can choose between the Chinese and the English interpretation lines. Please note that the English interpretation option will be in listen-only mode. Please dial in 15 minutes before the call is scheduled to begin and provide the Elite Entry Number to join the call.

Telephone replays will be accessible two hours after the conclusion of the conference call through June 12, 2024 by dialing the following numbers:

United States Toll Free:	1-877-344-7529
International:	1-412-317-0088
Chinese Line Access Code:	2937700
English Interpretation Line Access Code:	1729095

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.waterdrop-inc.com/.

About Waterdrop Inc.

Waterdrop Inc. (NYSE: WDH) is a leading technology platform dedicated to insurance and healthcare service with a positive social impact. Founded in 2016, with the comprehensive coverage of Waterdrop Insurance Marketplace and Waterdrop Medical Crowdfunding, Waterdrop aims to bring insurance and healthcare service to billions through technology. For more information, please visit www.waterdrop-inc.com.

For investor inquiries, please contact
Waterdrop Inc.
[email protected]

WATERDROP INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, unless otherwise noted)
		As of
		December 31, 2023		March 31, 2024
		RMB		RMB		USD
Assets
Current assets
Cash and cash equivalents		396,905		321,780		44,566
Restricted cash		577,121		404,201		55,981
Short - term investments		2,996,527		3,162,661		438,023
Accounts receivable, net		693,110		726,815		100,663
Current contract assets		572,871		594,282		82,307
Amount due from related parties		65		163		23
Prepaid expense and other assets		189,846		163,368		22,626
Total current assets		5,426,445		5,373,270		744,189
Non-current assets
Non-current contract assets		134,383		141,542		19,603
Property, equipment and software, net		33,878		32,950		4,564
Intangible assets, net		177,407		173,667		24,053
Long-term investments		211,758		217,397		30,109
Right of use assets, net		59,851		68,512		9,489
Deferred tax assets		24,190		25,042		3,468
Goodwill		80,751		80,751		11,184
Total non-current assets		722,218		739,861		102,470
Total assets		6,148,663		6,113,131		846,659
Liabilities, Mezzanine Equity and Shareholders' Equity
Current liabilities
Amount due to related parties		9,509		12,794		1,772
Insurance premium payables		591,953		405,672		56,185
Accrued expenses and other current liabilities		597,684		790,723		109,514
Short-term loans		137,557		75,173		10,411
Current lease liabilities		32,908		34,320		4,753
Total current liabilities		1,369,611		1,318,682		182,635
Non-current liabilities
Non-current lease liabilities		27,293		33,465		4,635
Deferred tax liabilities		73,305		82,380		11,409
Total non-current liabilities		100,598		115,845		16,044
Total liabilities		1,470,209		1,434,527		198,679
Mezzanine Equity
R edeemable non-controlling interests		92,760		92,685		12,837
Shareholders' equity
Class A ordinary shares		112		112		16
Class B ordinary shares		27		27		4
Treasury stock		(12)		(13)		(2)
Additional paid-in capital		7,003,423		6,897,876		955,345
Accumulated other comprehensive income		144,107		169,250		23,441
Accumulated deficit		(2,561,963)		(2,481,333)		(343,661)
Total shareholders' equity		4,585,694		4,585,919		635,143
Total liabilities, mezzanine equity and shareholders' equity		6,148,663		6,113,131		846,659

WATERDROP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(All amounts in thousands, except for share and per share data, or otherwise noted)
		For the Three Months Ended
		March 31, 2023		December 31, 2023		March 31, 2024
		RMB		RMB		RMB			USD
Operating revenue, net		606,165		659,364		704,700			97,600
Operating costs and expenses ( i )
Operating costs		(247,983)		(302,143)		(331,243)			(45,877)
Sales and marketing expenses		(173,401)		(174,817)		(182,146)			(25,227)
General and administrative expenses		(95,798)		(95,959)		(88,961)			(12,321)
Research and development expenses		(78,655)		(59,806)		(55,986)			(7,754)
Total operating costs and expenses		(595,837)		(632,725)		(658,336)			(91,179)
Operating profit		10,328		26,639		46,364			6,421
Other income
Interest income		30,876		34,659		39,804			5,513
Foreign currency exchange gain		282		6,956		1,514			210
Others, net		5,613		2,848		1,463			203
Profit before income tax		47,099		71,102		89,145			12,347
Income tax benefit/ (expense)		2,626		(15,164)		(8,588)			(1,189)
Net profit		49,725		55,938		80,557			11,158
Net loss attributable to mezzanine equity classified as non- controlling interests shareholders		-		(3,119)		(75)			(10)
Net profit attributable to ordinary shareholders		49,725		59,057		80,632			11,168
Other comprehensive income/(loss):
Foreign currency translation adjustment, net of tax		3,386		(39,390)		25,143			3,482
Unrealized gain on available for sale investments, net of tax		1,957		-		-			-
Total comprehensive income		55,068		16,548		105,700			14,640
Total comprehensive loss attributable to mezzanine equity classified as non-controlling interests shareholders		-		(3,119)		(75)			(10)
Total comprehensive income attributable to ordinary shareholders		55,068		19,667		105,775			14,650
Weighted average number of ordinary shares used in computing net profit per share
Basic		3,866,785,745		3,698,466,876		3,696,619,172			3,696,619,172
Diluted		4,027,428,601		3,762,270,456		3,756,462,107			3,756,462,107
Net profit per share attributable to ordinary shareholders
Basic		0.01		0.02		0.02			0.00
Diluted		0.01		0.02		0.02			0.00
(i) Share-based compensation expenses are included in the operating costs and expenses as follows.
		For the Three Months Ended
		March 31, 2023		December 31, 2023		March 31, 2024
		RMB		RMB		RMB			USD
Sales and marketing expenses		(16,529)		(1,991)		(1,820)			(252)
General and administrative expenses		(26,460)		(18,693)		(14,327)			(1,984)
Research and development expenses		(3,937)		(2,104)		(2,983)			(413)
Total		(46,926)		(22,788)		(19,130)			(2,649)

WATERDROP INC.
RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS
(All amounts in thousands, unless otherwise noted)
		For the Three Months Ended
		March 31, 2023		December 31, 2023		March 31, 2024
		RMB		RMB		RMB				USD
Net profit attributable to the Company's ordinary shareholders		49,725		59,057		80,632				11,168
Add:
Share-based compensation expense attributable to the Company's ordinary shareholders		46,926		22,556		19,260				2,667
Foreign currency exchange gain		(282)		(6,956)		(1,514)				(210)
Adjusted net profit attributable to the Company's ordinary shareholders		96,369		74,657		98,378				13,625

SOURCE Waterdrop Inc.