[Financial and Operational Highlights for the Third Quarter of 2022](index=1&type=section&id=Financial%20and%20Operational%20Highlights%20for%20the%20Third%20Quarter%20of%202022) [Summary of Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights%20for%20the%20Third%20Quarter%20of%202022_Summary) Waterdrop Inc. achieved healthy Q3 2022 revenue growth, sustained profitability, and positive cash flow, driven by increased first-year premiums and cost control Q3 2022 Financial and Operational Highlights | Metric | Q3 2022 Value | | :------------------------------------ | :------------------------------------ | | FYP (Waterdrop Insurance Marketplace) | RMB 1,785.3 million (US$251.0 million) | | FYP QoQ Growth | +8.4% | | Net Operating Revenue | RMB 772.2 million (US$108.6 million) | | Net Operating Revenue QoQ Growth | +10.1% | | Sales and Marketing Expenses YoY Change | -82.4% | | Total Operating Costs & Expenses YoY Change | -50.5% | | Net Profit | RMB 169.6 million (US$23.8 million) | | Cash & Short-term Investments (as of Sep 30, 2022) | RMB 3,588.6 million (US$504.5 million) | | Cash & Short-term Investments QoQ Increase | +RMB 300.5 million | | Insurance Products Offered (as of Sep 30, 2022) | 536 (vs. 454 in Q2 2022) | | Critical Illness FYP QoQ Growth | +7.8% | | Critical Illness FYP % of Overall FYP | 28.6% | | Cumulative Crowdfunding Donations | ~RMB 55.4 billion | | Cumulative Crowdfunding Donors | ~420 million people | | Cumulative Crowdfunding Patients | >2.69 million patients | [CEO's Remarks](index=1&type=section&id=Mr.%20Peng%20Shen%2C%20Founder%2C%20Chairman%2C%20and%20Chief%20Executive%20Officer%20of%20Waterdrop%2C%20commented) CEO Peng Shen noted solid financial performance, sequential revenue growth, and sustained net profit, emphasizing product innovation and platform transparency - Achieved solid financial performance with **10.1% sequential revenue growth** despite COVID-19 resurgence and soft macroeconomic environment[2](index=2&type=chunk) - Net profit reached **RMB 169.6 million**, demonstrating consistent momentum towards full-year profitability goal[2](index=2&type=chunk) - Enhanced insurance product offerings with customized critical illness products, including those waiving health declarations, and saw a **20% QoQ increase in premiums** from users under 40[2](index=2&type=chunk) - Medical crowdfunding business enhanced operational transparency and controls, resulting in **no malicious fundraising activities** for several consecutive months[2](index=2&type=chunk) - E-find Patient Platform sustained growth, recruiting over **900 patients** for clinical trials and expanding to over **400 programs**, including international multicenter trials[2](index=2&type=chunk) [Financial Results for the Third Quarter of 2022](index=2&type=section&id=Financial%20Results%20for%20the%20Third%20Quarter%20of%202022) [Operating Revenue, Net](index=2&type=section&id=Operating%20revenue%2C%20net) Net operating revenue in Q3 2022 was RMB 772.2 million, a slight YoY decrease but QoQ increase, driven by insurance brokerage and new crowdfunding fees Net Operating Revenue (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | | :---------------------- | :------ | :------ | :--------- | | Net Operating Revenue | 772,192 | 779,305 | -0.9% | [Insurance-related Income](index=2&type=section&id=Insurance-related%20income) Insurance-related Income (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | | :---------------------- | :------ | :------ | :--------- | | Insurance-related Income | 693,500 | 758,600 | -8.6% | - Decrease mainly due to a reduction in insurance brokerage income[3](index=3&type=chunk) [Crowdfunding Service Fees](index=2&type=section&id=Crowdfunding%20service%20fees) Crowdfunding Service Fees (RMB thousands) | Metric | Q3 2022 | Q3 2021 | | :---------------------- | :------ | :------ | | Crowdfunding Service Fees | 59,000 | Nil | - Service fees started being charged from **April 7, 2022**, at **3% of funds raised** (up to RMB 5,000 per campaign), with selective subsidies for needy patients[3](index=3&type=chunk) [Operating Costs and Expenses](index=2&type=section&id=Operating%20costs%20and%20expenses) Total operating costs and expenses significantly decreased by **50.5%** year-over-year in Q3 2022 due to effective cost control, particularly a sharp reduction in sales and marketing expenses Total Operating Costs and Expenses (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | Q2 2022 | QoQ Change | | :----------------------------- | :------ | :------ | :--------- | :------ | :--------- | | Total Operating Costs & Expenses | 639,629 | 1,292,296 | -50.5% | 545,495 | +17.3% | [Operating Costs](index=2&type=section&id=Operating%20costs) Operating Costs (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | Q2 2022 | QoQ Change | | :------------- | :------ | :------ | :--------- | :------ | :--------- | | Operating Costs | 341,293 | 296,317 | +15.2% | 244,616 | +39.5% | - YoY increase primarily driven by a **RMB 22.8 million increase** in professional and outsourced customer service fees, a **RMB 63.7 million reclassification** of crowdfunding consultants team costs, and a **RMB 19.5 million increase** in one-year health insurance coverage cost, partially offset by a **RMB 85.0 million decrease** in personnel cost for consultants and insurance agents[4](index=4&type=chunk) - QoQ increase primarily due to a **RMB 64.1 million increase** in professional and outsourced customer service fees[4](index=4&type=chunk) [Sales and Marketing Expenses](index=2&type=section&id=Sales%20and%20marketing%20expenses) Sales and Marketing Expenses (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | Q2 2022 | QoQ Change | | :---------------------- | :------ | :------ | :--------- | :------ | :--------- | | Sales and Marketing Expenses | 137,919 | 781,671 | -82.4% | 144,423 | Stable | - YoY decrease primarily due to a **RMB 500.6 million decrease** in marketing expenses to third-party traffic channels and a **RMB 124.2 million decrease** in outsourced sales and marketing service fees[4](index=4&type=chunk) [General and Administrative Expenses](index=2&type=section&id=General%20and%20administrative%20expenses) General and Administrative Expenses (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | Q2 2022 | QoQ Change | | :-------------------------------- | :------ | :------ | :--------- | :------ | :--------- | | General and Administrative Expenses | 82,039 | 111,419 | -26.4% | 86,054 | Stable | - YoY decrease due to a **RMB 8.7 million decrease** in share-based compensation expenses, a **RMB 9.9 million decrease** in personnel cost, and a **RMB 5.4 million decrease** in rental expenses[4](index=4&type=chunk) [Research and Development Expenses](index=2&type=section&id=Research%20and%20development%20expenses) Research and Development Expenses (RMB thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | Q2 2022 | QoQ Change | | :---------------------------- | :------ | :------ | :--------- | :------ | :--------- | | Research and Development Expenses | 78,378 | 102,889 | -23.8% | 70,402 | +11.3% | - YoY decrease primarily due to **RMB 19.5 million decreases** in R&D personnel costs and share-based compensation expenses[4](index=4&type=chunk) - QoQ increase mainly due to **RMB 7.7 million increases** in R&D personnel costs and share-based compensation expenses[4](index=4&type=chunk) [Operating Profit](index=3&type=section&id=Operating%20profit) Waterdrop achieved an operating profit of **RMB 132.6 million** in Q3 2022, a significant turnaround from an operating loss of **RMB 513.0 million** in Q3 2021, though slightly lower than Q2 2022 Operating (Loss)/Profit (RMB thousands) | Metric | Q3 2022 | Q3 2021 | Q2 2022 | | :--------------- | :------ | :-------- | :------ | | Operating Profit | 132,563 | (513,000) | 155,923 | [Interest Income](index=3&type=section&id=Interest%20income) Interest income for Q3 2022 more than doubled year-over-year to **RMB 24.3 million**, primarily due to an increased bank balance and short-term investments resulting from positive operating cash flow Interest Income (RMB thousands) | Metric | Q3 2022 | Q3 2021 | | :------------- | :------ | :------ | | Interest Income | 24,331 | 11,928 | - Increase primarily due to the increase in bank balance and short-term investments as a result of positive operating cash flow[6](index=6&type=chunk) [Income Tax Benefit](index=3&type=section&id=Income%20tax%20benefit) The company reported an income tax benefit of **RMB 9.1 million** in Q3 2022, slightly higher than the **RMB 8.2 million** benefit in the same period last year Income Tax Benefit (RMB thousands) | Metric | Q3 2022 | Q3 2021 | | :--------------- | :------ | :------ | | Income Tax Benefit | 9,134 | 8,247 | [Net Profit Attributable to Waterdrop Inc.](index=3&type=section&id=Net%20profit%20attributable%20to%20Waterdrop%20Inc.) Waterdrop Inc. achieved a net profit of **RMB 169.6 million** in Q3 2022, a significant improvement from a net loss of **RMB 477.0 million** in Q3 2021, though a decrease from Q2 2022 Net (Loss)/Profit Attributable to Waterdrop Inc. (RMB thousands) | Metric | Q3 2022 | Q3 2021 | Q2 2022 | | :------------------------------------------ | :------ | :-------- | :------ | | Net (Loss)/Profit Attributable to Waterdrop | 169,614 | (476,975) | 206,943 | [Adjusted Net Profit Attributable to Waterdrop Inc.](index=3&type=section&id=Adjusted%20net%20profit%20attributable%20to%20Waterdrop) Adjusted net profit for Q3 2022 was **RMB 215.7 million**, a substantial turnaround from an adjusted net loss of **RMB 453.6 million** in Q3 2021, but slightly lower than Q2 2022 Adjusted Net (Loss)/Profit Attributable to Waterdrop Inc. (RMB thousands) | Metric | Q3 2022 | Q3 2021 | Q2 2022 | | :------------------------------------------------ | :------ | :-------- | :------ | | Adjusted Net (Loss)/Profit Attributable to Waterdrop | 215,727 | (453,643) | 232,525 | [Cash and Cash Equivalents and Short-term Investments](index=3&type=section&id=Cash%20and%20cash%20equivalents%20and%20short-term%20investments) [Summary of Cash and Investments](index=3&type=section&id=Cash%20and%20cash%20equivalents%20and%20short-term%20investments_Summary) As of September 30, 2022, Waterdrop's combined cash and cash equivalents and short-term investments increased to **RMB 3,588.6 million**, reflecting positive operating cash flow Cash and Cash Equivalents and Short-term Investments (RMB thousands) | Metric | As of Sep 30, 2022 | As of Dec 31, 2021 | QoQ Change (from Q2 2022) | | :------------------------------------------ | :----------------- | :----------------- | :------------------------ | | Cash and Cash Equivalents & Short-term Investments | 3,588,600 | 2,787,100 | +300,500 | [Share Repurchase Plan](index=3&type=section&id=Share%20Repurchase%20Plan) [Summary of Share Repurchase Plan](index=3&type=section&id=Share%20Repurchase%20Plan_Summary) As of the end of Q3 2022, Waterdrop had repurchased approximately **5.8 million ADSs** for a total consideration of approximately **US$8.5 million** under its share repurchase program - Cumulatively repurchased approximately **5.8 million ADSs** from the open market[8](index=8&type=chunk) - Total consideration for repurchases was approximately **US$8.5 million**[8](index=8&type=chunk) - The share repurchase program was launched in **September 2021** and amended in **September 2022**[8](index=8&type=chunk) [Exchange Rate](index=3&type=section&id=Exchange%20Rate) [Summary of Exchange Rate Information](index=3&type=section&id=Exchange%20Rate_Summary) The report uses an exchange rate of **RMB 7.1135 to US$1.00**, the noon buying rate on September 30, 2022, for convenience, with a disclaimer regarding actual convertibility - All translations from RMB to USD were made at the rate of **RMB 7.1135 to US$1.00**[9](index=9&type=chunk) - The exchange rate was the noon buying rate in effect on **September 30, 2022**, in the H.10 statistical release of the Federal Reserve Board[9](index=9&type=chunk) - The Company makes no representation that the RMB or USD amounts could be converted at any particular rate or at all[9](index=9&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) [Summary of Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures_Summary) Waterdrop Inc. uses adjusted net operating revenue and net profit/loss as non-GAAP measures, excluding share-based compensation and mutual aid plan impact, reconciled to GAAP - Company uses adjusted net operating revenue and adjusted net profit/loss as non-GAAP financial measures[10](index=10&type=chunk) - Adjusted net operating revenue excludes management fee income from mutual aid business[10](index=10&type=chunk) - Adjusted net profit/loss excludes share-based compensation expense, the impact of terminating the mutual aid plan, and foreign currency exchange gain or losses[10](index=10&type=chunk) - Non-GAAP measures are not presented in accordance with U.S. GAAP and are reconciled to the most comparable U.S. GAAP performance measures[10](index=10&type=chunk) [Safe Harbor Statement](index=4&type=section&id=Safe%20Harbor%20Statement) [Summary of Safe Harbor Statement](index=4&type=section&id=Safe%20Harbor%20Statement_Summary) This section contains a standard safe harbor statement, indicating that the press release includes forward-looking statements subject to risks and uncertainties - Press release contains "forward-looking" statements identified by terminology such as "will," "expects," "anticipates," etc[12](index=12&type=chunk) - Forward-looking statements involve inherent risks and uncertainties, including those related to future business development, financial condition, industry growth, market acceptance, relationships with partners, competition, and government policies[12](index=12&type=chunk) - Waterdrop does not undertake any obligation to update any forward-looking statement, except as required under applicable law[12](index=12&type=chunk) [Conference Call Information](index=4&type=section&id=Conference%20Call%20Information) [Summary of Conference Call Information](index=4&type=section&id=Conference%20Call%20Information_Summary) Waterdrop's management hosted a conference call on **December 6, 2022**, to discuss the financial results, with dial-in details and webcast information provided - Waterdrop's management team held a conference call on **December 6, 2022**, at **7:00 AM U.S. Eastern Time**[13](index=13&type=chunk) - Dial-in details and an Elite Entry Number (**5857670**) were provided for participants[11](index=11&type=chunk)[13](index=13&type=chunk) - A telephone replay was accessible through **December 13, 2022**, and a live and archived webcast is available on the Company's investor relations website[13](index=13&type=chunk) [About Waterdrop Inc.](index=4&type=section&id=About%20Waterdrop%20Inc.) [Summary of Company Profile](index=4&type=section&id=About%20Waterdrop%20Inc._Summary) Waterdrop Inc. is a leading technology platform founded in **2016**, dedicated to insurance and healthcare services with a positive social impact - Waterdrop Inc. (NYSE: WDH) is a leading technology platform dedicated to insurance and healthcare service with a positive social impact[14](index=14&type=chunk) - Founded in **2016**, it offers comprehensive coverage through Waterdrop Insurance Marketplace and Waterdrop Medical Crowdfunding[14](index=14&type=chunk) - The company's aim is to "bring insurance and healthcare service to billions through technology"[14](index=14&type=chunk) [UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) [Summary of Balance Sheet](index=5&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS_Summary) The unaudited condensed consolidated balance sheets show Waterdrop's financial position as of **September 30, 2022**, highlighting increases in total assets and shareholders' equity Unaudited Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | Dec 31, 2021 (RMB) | Sep 30, 2022 (RMB) | Sep 30, 2022 (USD) | | :--------------------------------------- | :----------------- | :----------------- | :----------------- | | **Assets** | | | | | Cash and cash equivalents | 817,719 | 598,353 | 84,115 | | Restricted cash | 667,664 | 464,646 | 65,319 | | Short-term investments | 1,969,362 | 2,990,238 | 420,361 | | Accounts receivable, net | 643,843 | 762,402 | 107,177 | | Total current assets | 5,033,042 | 5,544,392 | 779,418 | | Total assets | 5,250,599 | 5,770,469 | 811,201 | | **Liabilities** | | | | | Insurance premium payables | 685,028 | 468,504 | 65,861 | | Accrued expenses and other current liabilities | 498,752 | 579,313 | 81,439 | | Total current liabilities | 1,249,145 | 1,075,518 | 151,194 | | Total liabilities | 1,277,173 | 1,102,222 | 154,948 | | **Shareholders' Equity** | | | | | Total shareholders' equity | 3,973,426 | 4,668,247 | 656,253 | [UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) [Summary of Statements of Operations](index=6&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS_Summary) The unaudited condensed consolidated statements of operations for Q3 2022 show a significant turnaround from a net loss in Q3 2021 to a net profit, driven by stable revenue and reduced operating expenses Unaudited Condensed Consolidated Statements of Operations (Three Months Ended September 30, Amounts in thousands) | Metric | Q3 2021 (RMB) | Q2 2022 (RMB) | Q3 2022 (RMB) | Q3 2022 (USD) | | :-------------------------------------------------- | :------------ | :------------ | :------------ | :------------ | | Operating revenue, net | 779,305 | 701,418 | 772,192 | 108,553 | | Total operating costs and expenses | (1,292,296) | (545,495) | (639,629) | (89,917) | | Operating (loss)/profit | (512,991) | 155,923 | 132,563 | 18,636 | | Net (loss)/profit attributable to Waterdrop Inc. | (476,975) | 206,943 | 169,614 | 23,844 | | Comprehensive (loss)/income | (491,296) | 293,944 | 263,697 | 37,070 | Unaudited Condensed Consolidated Statements of Operations (Nine Months Ended September 30, Amounts in thousands) | Metric | 9M 2021 (RMB) | 9M 2022 (RMB) | 9M 2022 (USD) | | :-------------------------------------------------- | :------------ | :------------ | :------------ | | Operating revenue, net | 2,602,026 | 2,122,298 | 298,348 | | Total operating costs and expenses | (4,390,931) | (1,717,167) | (241,395) | | Operating (loss)/profit | (1,788,905) | 405,131 | 56,953 | | Net (loss)/profit attributable to Waterdrop Inc. | (1,502,883) | 481,515 | 67,691 | | Comprehensive (loss)/income | (1,529,020) | 655,888 | 92,204 | - Share-based compensation expenses are included in the operating costs and expenses[17](index=17&type=chunk)[20](index=20&type=chunk) [RECONCILIATIONS OF GAAP AND NON-GAAP RESULTS](index=8&type=section&id=RECONCILIATIONS%20OF%20GAAP%20AND%20NON-GAAP%20RESULTS) [Summary of GAAP and Non-GAAP Reconciliations](index=8&type=section&id=RECONCILIATIONS%20OF%20GAAP%20AND%20NON-GAAP%20RESULTS_Summary) This section reconciles GAAP and non-GAAP net operating revenue and net profit/loss, detailing adjustments for mutual aid income, share-based compensation, and foreign currency Reconciliation of GAAP and Non-GAAP Net Operating Revenue (Three Months Ended September 30, Amounts in thousands) | Metric | Q3 2021 (RMB) | Q2 2022 (RMB) | Q3 2022 (RMB) | Q3 2022 (USD) | | :---------------------------- | :------------ | :------------ | :------------ | :------------ | | Net operating revenue | 779,305 | 701,418 | 772,192 | 108,553 | | Less: Management fee income | — | — | — | — | | Adjusted net operating revenue | 779,305 | 701,418 | 772,192 | 108,553 | Reconciliation of GAAP and Non-GAAP Net (Loss)/Profit (Three Months Ended September 30, Amounts in thousands) | Metric | Q3 2021 (RMB) | Q2 2022 (RMB) | Q3 2022 (RMB) | Q3 2022 (USD) | | :------------------------------------ | :------------ | :------------ | :------------ | :------------ | | Net (loss)/profit | (476,975) | 206,943 | 169,614 | 23,844 | | Add: Share-based compensation expense | 36,040 | 25,745 | 25,552 | 3,592 | | Add: Foreign currency exchange (gain)/loss | (12,708) | (163) | 1,012 | 142 | | Add: Impact of terminating the mutual aid plan | — | — | 19,549 | 2,748 | | Adjusted net (loss)/profit | (453,643) | 232,525 | 215,727 | 30,326 | - The impact of terminating the mutual aid plan includes the estimated cost of medical expenses and one-year health insurance coverage, with **RMB 19.5 million (US$2.7 million)** recorded in Q3 2022[22](index=22&type=chunk)

Financial Data and Key Metrics Changes - The company achieved a net profit of RMB207 million in Q2 2022, nearly doubling sequentially, and has reported non-GAAP net profit for three consecutive quarters [6][21][48] - Revenue increased by 8.1% quarter-over-quarter, although it decreased by 25.3% year-over-year to RMB701 million due to a decline in insurance-related income [6][45] - Operating costs and expenses decreased by 68.9% year-over-year to RMB546 million, with a marginal increase of 2.5% quarter-over-quarter [46][48] Business Line Data and Key Metrics Changes - The insurance business remains the only profit contributor, with net profit reaching RMB207 million, up 97% sequentially [21][45] - The take rate increased from 34% in Q1 to 38% in Q2, driven by improvements in the insurance business [45] - The number of active app users reached 3.4 million, up by 47%, and short-term insurance premiums from marketing channels increased by 60% [26] Market Data and Key Metrics Changes - The life and health insurance premium growth in China was sluggish in the first half of 2022, underperforming the P&C insurance industry [20] - The cumulative number of donors on the Waterdrop Medical Crowdfunding platform reached 412 million, raising approximately RMB53.3 billion for patients [12][33] Company Strategy and Development Direction - The company is shifting its strategy from rapid growth to sustainable development, focusing on enhancing product value and user needs [7][8] - Plans to increase investments in new business opportunities in the second half of 2022 while maintaining a commitment to high-quality and sustainable development [6][7] - The company aims to leverage technology and innovation to enhance operational efficiency and user experience [9][31] Management Comments on Operating Environment and Future Outlook - Management remains optimistic about the Chinese economy and healthcare industry despite external challenges [7] - The company is committed to achieving a healthy and sustainable operating profit for 2022, with a focus on continuous improvement and user value [19][48] Other Important Information - The company has launched a new share repurchase program, with plans to repurchase up to USD 80 million worth of ADS [18] - The Waterdrop Medical Crowdfunding platform has implemented a service fee of 3% to cover operational costs, which has not adversely affected user engagement [33][64] Q&A Session Summary Question: What is the growth strategy for the insurance business? - The company plans to explore opportunities in various business models, including Directly 2C, 2A2C, and 2B2C, with a focus on the WeChat ecosystem for user acquisition and education [50][51][56] Question: Can you explain the service and revenue model of the crowdfunding platform? - The crowdfunding platform charges a service fee of 3% of the withdrawal amount for campaigns, which supports operational costs while maintaining a commitment to high-quality services [62][64]

Waterdrop Inc. (NYSE:WDH) Q1 2022 Earnings Conference Call June 15, 2022 8:00 AM ET Company Participants Xiaojiao Cui - IR Shen Peng - Founder, Chairman & CEO Yang Guang - Co-Founder, Director and General Manager of Insurance Marketplace Hu Yao - Co-Founder, Director and General Manager of Medical Crowdfunding and Healthcare Kevin Shi - CFO Conference Call Participants Michael Li - Bank of America Qingqing Mao - CICC Operator Good morning, ladies and gentlemen, and thank you for standing by for Waterdrop In ...

Financial Data and Key Metrics Changes - The company's net operating revenue decreased by 27.3% year-over-year to RMB604 million from RMB830 million, and decreased by 25.6% on a comparable basis [41] - Operating costs and expenses decreased significantly by 38.6% year-over-year to RMB678 million, with a quarter-over-quarter decrease of 47.5% [42] - The company incurred a net loss of RMB71 million on a GAAP basis, while generating an adjusted net profit of RMB5.9 million, compared to a net loss of RMB404 million and an adjusted net loss of RMB191 million in the same quarter of last year [45] Business Line Data and Key Metrics Changes - The first full quarter of the new business model led to a significant improvement in operating efficiency, with a reported adjusted net profit of RMB5.9 million in Q4 compared to a loss of RMB453 million in Q3 [16][41] - The retention rate increased significantly, driving the take rate of the short-term insurance business to 33% in Q4 [17] - The average productivity of long-term insurance consultants reached RMB66,000 per month, an increase of 66% compared to Q3 [19] Market Data and Key Metrics Changes - The annual growth in gross written premium (GWP) for the health insurance sector was only 3% in 2021, the lowest in the past 10 years, with GWP seeing a decrease of 3% year-over-year for both the third and fourth quarters [14] - The total profit of life and health insurance companies decreased by 47% year-over-year, reflecting the industry's adjustment phase [14] Company Strategy and Development Direction - The company has shifted its strategy from rapid user base growth to pursuing higher quality development, focusing on sustainable growth and profitability [8][9] - Waterdrop plans to continue investing in technology and innovation while optimizing its business model to comply with new regulatory guidelines [12][20] - The company aims to achieve profitability in its established business on a non-GAAP basis for the year 2022 [45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth potential of China's health insurance market despite short-term challenges [10][13] - The company views recent regulatory changes as an opportunity for industry consolidation and improvement in the competitive landscape [12][26] - Management emphasized the importance of cost control and operational efficiency to navigate the current market conditions [54] Other Important Information - The company has initiated a share repurchase plan, buying back approximately 1.3 million ADSs since its announcement [11] - Waterdrop's Medical Crowdfunding business has helped raise over RMB48.4 billion, reinforcing its market-leading position [27] Q&A Session Summary Question: Can you discuss the renewal rate and strategy for existing customers? - The premium renewal rate improved to 89% in December 2021 from 62% in September 2021, with strategies including upgraded renewal products and more coverage options [48][49] Question: What drove the improvement in profitability and can we expect this to continue? - The significant reduction in operating costs and marketing expenses contributed to profitability, with expectations for continued improvement in 2022 [51][54] Question: What is the target for first-year premium growth next year? - The company expects revenue growth to stabilize in 2022, focusing on sustainable models rather than aggressive expansion [60]

Financial Data and Key Metrics Changes - In Q3 2021, the first year premium (FYP) reached RMB4,639 million, achieving stable and positive growth despite industry transformation [41] - Net operating revenue decreased by 9.7% year-over-year to RMB779 million, attributed to a softening trend in FYP and a decrease in take rate [42] - Operating costs and expenses increased by 31.5% year-over-year to RMB1,292 million, but decreased by 26.4% quarter-over-quarter, indicating effective cost control measures [42][43] Business Line Data and Key Metrics Changes - The FYPs for the first three quarters increased by 37.5% year-over-year to RMB14.46 billion, exceeding the total FYPs for the entire previous year [12] - Despite a negative growth in the industry during Q3, the company's FYPs remained flat, showing resilience [12] - The monthly take rate of short-term insurance products increased by 5% from July to September, driven by improved retention rates [16] Market Data and Key Metrics Changes - The gross written premium of the health insurance sector increased by only 5% year-over-year in the first three quarters, with a decline of 3% in Q3 [11] - Major listed insurance companies experienced an average net profit decline of about 36% year-over-year during Q3 [11] Company Strategy and Development Direction - The company is focused on transforming its online user acquisition model to comply with new regulatory guidance and industry trends [15] - Waterdrop aims to enhance its fundamental operations and believes in the long-term positive trend in the Chinese healthcare market [7][9] - The company is committed to strengthening cost control and optimizing profitability for sustainable development [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged increased volatility in capital markets and a softening growth in the insurance industry since the beginning of Q3 [5] - The company is proactively responding to new regulatory guidelines and has pivoted its business model to ensure compliance [8] - Management expressed confidence in the long-term prospects of the company and the healthcare market, despite short-term challenges [7][9] Other Important Information - The company has initiated a one-year share repurchase plan, repurchasing nearly 500,000 ADS since its announcement [6] - The management team has committed to not selling shares for at least 18 months post-IPO lockup, demonstrating confidence in the company's future [7] Q&A Session Summary Question: Inquiry about cost reduction in Q3 and its relation to seasonality or strategy changes - Management indicated that the reduction in costs was primarily due to a strategic change in cost control and also influenced by seasonality, with significant decreases in marketing expenses and total operating costs compared to Q2 [47][48] Question: Inquiry about the advantages of the commission system compared to traditional insurance companies - Management explained that the new offline brokerage model reduces layers in the sales structure, enhancing recruitment competitiveness and operational efficiency through AI-driven systems [51][52]

Financial Data and Key Metrics Changes - First-year premiums grew by 94% to RMB 5,357 million in Q2 2021, indicating strong demand from lower-tier cities [6][29] - Net operating revenue increased by 38% year-over-year to RMB 939 million, with adjusted net operating revenue showing a 44.4% growth [6][30] - The company reported a net loss of RMB 656 million on a GAAP basis and an adjusted net loss of RMB 570 million, with a negative adjusted net margin of 60.7% [33] Business Line Data and Key Metrics Changes - The number of insurance products offered increased from 240 to 275, with new products developed to meet current market demands [17] - The share of short-term critical illness products rose from 14.9% in Q1 to 17.3% in Q2, reflecting diversification in product offerings [19] - Customer base grew to 102 million, with 4.2 million customers purchasing insurance products in Q2, a 53% year-over-year increase [20] Market Data and Key Metrics Changes - The company experienced a temporary decrease in sales force efficiency due to adjustments made post-IPO, impacting long-term insurance product sales [44] - The marketing expenses increased by 270% year-over-year to RMB 1,245 million, driven by heightened competition and user acquisition efforts [32] Company Strategy and Development Direction - The company aims to transition from rapid expansion to enhancing service quality and user value, focusing on sustainable growth [11] - Waterdrop is committed to technological innovation, enhancing the entire business chain through advanced algorithms and data analysis [12][14] - The company plans to leverage government-backed health insurance programs to expand its market reach and improve service offerings [52] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's long-term sustainable development despite short-term challenges and regulatory pressures [7][15] - The company anticipates that regulatory measures will ultimately benefit compliant institutions and improve industry standards [37] Other Important Information - The company announced a share repurchase program of up to $50 million over the next 12 months, reflecting confidence in its long-term value [15][16] - As of the end of Q2, the crowdfunding platform had 372 million users who donated over RMB 42.8 billion to 2.1 million patients [15] Q&A Session Summary Question: Impact of CBIRC document number 87 on future operations - Management indicated that the regulatory measures aim to promote healthy development in the internet insurance sector and have proactively adjusted operations to comply with new regulations [36][37] Question: Growth strategy for healthcare services - The company is expanding its healthcare services, including new consumer healthcare products and partnerships with pharmacies to enhance service offerings [38][39] Question: Breakdown of long-term health product growth rate - Long-term insurance sales growth was slower due to a temporary decrease in the sales force and adjustments made post-IPO, but improvements in service quality are expected to drive future growth [42][44] Question: Reasons for increased acquisition and marketing expenses - The increase in marketing expenses was driven by user acquisition efforts and brand building, with a focus on maintaining a healthy ROI despite rising customer acquisition costs [47][48] Question: Development and strategy regarding Huiminbao - The company is actively participating in government-backed health insurance programs, leveraging its technology and services to enhance efficiency and meet consumer demand [50][52]