Waterdrop Q3 2025 Earnings Call - AI Integration Drives Robust Growth and Efficiency Gains

Company Spokesperson/Executive, Waterdrop: For the first three quarters of 2025, the company’s total revenue amounted to CNY 2.57 billion, up 23.1% year on year. 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 sustained 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 44.3%. The medical profiling platform maintained stable operations and has raised medical campaigns for a cumulative total of 3.61 million patients as of the end of this quarter. The digital clinical trial solution business continued to excel in project fulfillment, enrolling over 1,000 patients in one single quarter, demonstrating robust growth momentum. This quarter, we continued 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 are 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 this 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 Civil Affairs Bureau, we established the Waterdrop Co-Help Program, which allows patients in need to apply for assistance online and offline, providing an innovative model 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 Jiang Wei to introduce the development of insurance business in Q3. Hi, everyone. This is Jiang 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 allowed 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 strategies. On the supply side, we continue to drive product innovation. In this quarter, we introduced Tencent’s Family Protection Plan, which covers up to nine family members under one single policy, and upgraded Guangminghao, leading to high-end medical insurance with an expanded network of quality private hospitals.

For critical illness insurance, we further enriched our Shouhu Gen X series by introducing modular options tailored to diverse budget needs. We also upgraded the Wuyou Shouhu disability insurance series, enhancing it to achieve comprehensive coverage ranging from extensive protection. Pre-existing condition insurance contributed about CNY 400 million in FIP during this quarter, a year-on-year increase of 103.9%. On the service side, we deployed AI more widely, enhancing operational efficiency. We extended the rollout of AI Pro insurance module on our WeChat Mini Program homepage. This LLM-powered module 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 efficiency. In the third quarter, it assisted in achieving an 82% increase in FIP compared to the Q2. In the WeiCom service scenarios, the per-lead productivity of AI medical insurance experts in September doubled that of June.

AI applications also continue 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 assistance, Keyi Point AI, reduced the response time from underwriting cases for the traditional manual model of five minutes to one second. The AI super pre-sales assistant has consistently maintained higher APL than human agents. And beginning in September, the 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 one 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 applications across multiple business scenarios. That concludes our insurance update in this quarter. Hi, I’m Li Zhiju.

Now, I will walk you through the third quarter’s progress in profiling and healthcare sectors. As of September 30, 2025, approximately 485 million people had cumulative registrations, a total of CNY 71.2 billion to 3.61 million patients through Waterdrop Medical Profiling. In the third quarter, we focused on strengthening the campaign risk control measures. We extended core scenarios strategically, incorporating differentiated modifications to our workflow, which boosted the efficiency of the review process. By analyzing donation visit data to identify structural patterns, advanced analysts 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 the course of the request review and potential usage of funds, with real-time display review timeline and the reviewer’s presentation status. This now gives donors clear insight into how their contribution, how their donations are allocated and used. This narrative has profoundly enhanced the transparency, rationality, and the traceability of fund distribution. In our healthcare business, continuing strong performance this quarter, the eFind platform extended 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 it launched, the program has achieved accumulated 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 the clinical development process of our partners. Notably, in the challenging field of gynecological tumors, quarterly enrollment increased by 130% compared to the previous four-quarter average level. The company has also made significant strides in chronic disease. Building on its existing focus on skin disease, respiratory conditions, and diabetic hypertension, the company has expanded its disease coverage into rheumatology and immunology. Enhancing digital matching accuracy between patient database and project libraries remains 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 delivers satisfactory fulfillment quality, driving sustained order growth.

As a result, the 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 applications in medical patient service scenarios, launching projects in patient health management, knowledge promotion, and digital humans. The company secured a three-year contract with a world-leading pharmaceutical for patient management, serving hundreds of thousands of patients and profoundly improving service efficiency and user experience. Now, I will hand over to Xiaoying, 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 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 CNY 975 million, marking a year-on-year growth of 38.4%, reflecting a strong growth trajectory. By segment, our insurance business generated about CNY 870 million in revenue, up 44.8% year-on-year. Profiling service fees stood at around CNY 65.66 million, remaining stable year-on-year. And digital clinical trial solutions contributed over CNY 31.85 million, with a year-on-year increase of 31.3%. Operating costs and expenses totaled approximately CNY 861 million, marking a year-on-year increase of 27.1%. This growth rate of operating costs was lower than the revenue growth, further boosting profitability. Operating costs for this quarter reached CNY 475 million, up 39.5% year-on-year, driven by a CNY 66.7 million rise in cost of a referral and service fee, along with CNY 32.4 million and a CNY 16.9 million increase in personal costs and the cost of profiling consultant fees. Sales and marketing expenses amounted to CNY 243 million, rising 40.3% year-on-year.

This growth mainly because of the enhanced AI applications, which improved the user identification accuracy and the conversion rate. Based on this, we boosted our traffic investment, resulting in CNY 79 million year-over-year rise in the marketing expenses for the third-party traffic channels. General and administrative expenses declined 23.7% year-over-year to CNY 84.7 million. Key factors include a CNY 15.6 million reduction in personal costs and the absence of last year’s CNY 20.6 million impairment loss, which contributed to the delta decrease. The R&D expenses rose 10.2% to over CNY 58.3 million, with personal costs and cross-server expense and other technical support expenses increasing by CNY 3.2 million and CNY 2.7 million, respectively, compared to the same period of 2024. In this quarter, the company reported an operating profit of nearly CNY 114 million, marking a substantial year-over-year increase of 329.8%. Net profit attributable to the company’s ordinary shareholders reached CNY 158 million, up 60.1% year-over-year.

As of the end of this period, the company held ample cash position of about CNY 3.61 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 further strong acts 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.