Waterdrop(WDH) - 2023 Q2 - Quarterly Report

Q1 2023 Financial Results Overview Waterdrop Inc. reported resilient Q1 2023 performance, achieving increased FYP, sustained profitability, and strategic advancements Financial and Operational Highlights In Q1 2023, Waterdrop demonstrated resilient business performance with a quarter-over-quarter increase in first-year premiums, maintaining profitability and a strong cash position Q1 2023 Key Financial & Operational Metrics | Metric | Value (RMB million) | Change (QoQ) | | :--- | :--- | :--- | | First-Year Premiums (FYP) | 1,692.0 | ▲ 6.3% | | Net Operating Revenue | 606.2 | ▼ 10.8% | | Net Profit | 49.7 | - | | Operating Costs | - | ▼ 11.0% | | Total Operating Costs & Expenses | - | ▼ 1.8% | | Cash, Cash Equivalents & Short-term Investments | 3,597.3 | - | - The number of insurance products offered on the platform increased to 876 as of March 31, 2023, up from 775 at the end of 2022[2] - As of March 31, 2023, Waterdrop Medical Crowdfunding has cumulatively facilitated approximately RMB 58.4 billion in donations from 432 million people to over 2.86 million patients[2] Management Commentary CEO Mr. Peng Shen highlighted the company's resilient and high-quality development, achieving another profitable quarter with strategic initiatives in user acquisition, risk control, and platform expansion - Insurance Business: Focused on optimizing user acquisition, streamlining channel operations, enriching product offerings for the underaged and elderly, and upgrading its AI-empowered dialogue robot[4] - Medical Crowdfunding: Improved operational capabilities and risk control strategies to eliminate unreasonable fundraising targets, collaborating with multiple parties to combat dishonest fundraising practices[5] - Clinical Trial Solutions (E-find Patient Platform): Enrolled over 700 patients and launched more than 70 clinical trial programs in Q1, serving over 120 pharmaceutical companies and CROs, expanding from oncology to other diseases[6] Detailed Financial Results This section details Waterdrop's Q1 2023 financial performance, including revenue, costs, profitability, and cash position Net Operating Revenue Net operating revenue for Q1 2023 was RMB 606.2 million, a 6.6% decrease year-over-year, primarily due to a decline in insurance-related income, offset by new crowdfunding service fees and growth in digital clinical trial solutions Q1 2023 Net Operating Revenue Breakdown (YoY) | Revenue Stream | Q1 2023 (RMB million) | Q1 2022 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Total Net Operating Revenue | 606.2 | 648.7 | ▼ 6.6% | | Insurance-related Income | 536.3 | 628.2 | ▼ 14.6% | | Crowdfunding Service Fees | 42.0 | 0 | N/A | | Digital Clinical Trial Solution Income | 22.8 | 8.6 | ▲ 165.1% | Operating Costs and Expenses Total operating costs and expenses increased by 12.0% year-over-year to RMB 595.8 million, driven by reclassification of crowdfunding consultant costs, while sales and marketing expenses decreased Q1 2023 Operating Costs and Expenses Breakdown (YoY) | Expense Category | Q1 2023 (RMB million) | Q1 2022 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | Total Operating Costs & Expenses | 595.8 | 532.0 | ▲ 12.0% | | Operating Costs | 248.0 | 154.9 | ▲ 60.1% | | Sales and Marketing Expenses | 173.4 | 204.3 | ▼ 15.1% | | General and Administrative Expenses | 95.8 | 102.0 | ▼ 6.1% | | Research and Development Expenses | 78.7 | 70.8 | ▲ 11.2% | - The primary driver for the YoY increase in operating costs was the reclassification of RMB 61.5 million in crowdfunding consultant team costs from sales and marketing expenses, as the company began generating crowdfunding service fees in April 2022[9] Profitability Waterdrop remained profitable in Q1 2023 with a net profit of RMB 49.7 million and an adjusted net profit of RMB 96.4 million, despite declines from previous periods Profitability Metrics Comparison | Metric | Q1 2023 (RMB million) | Q4 2022 (RMB million) | Q1 2022 (RMB million) | | :--- | :--- | :--- | :--- | | Operating Profit | 10.3 | 72.9 | 116.6 | | Net Profit Attributable to Waterdrop | 49.7 | 126.2 | 105.0 | | Adjusted Net Profit | 96.4 | 159.7 | 127.3 | Cash Position and Share Repurchase The company maintained a strong balance sheet with RMB 3,597.3 million in cash, cash equivalents, and short-term investments, while continuing its share repurchase program - As of March 31, 2023, the company's combined cash, cash equivalents, and short-term investments totaled RMB 3,597.3 million (US$523.8 million)[13] - Under its share repurchase plan, the company has cumulatively repurchased approximately 24.9 million ADSs for a total of US$61.2 million as of May 31, 2023[14] Supplementary Information This section details the company's non-GAAP financial measures and provides information on the Q1 2023 results conference call Non-GAAP Financial Measures The company utilizes adjusted net profit, a non-GAAP financial measure, for evaluating operational performance by excluding share-based compensation expenses and foreign currency exchange gains or losses - Adjusted net profit is a non-GAAP measure that excludes share-based compensation expense and foreign currency exchange gains or losses from the GAAP net profit[16] Conference Call Information Waterdrop's management will host a conference call on June 2, 2023, at 8:00 AM U.S. Eastern Time to discuss the first-quarter financial results - A conference call to discuss Q1 2023 financial results is scheduled for June 2, 2023, at 8:00 AM U.S. Eastern Time[20] Financial Statements This section presents the unaudited condensed consolidated balance sheets, statements of operations, and GAAP to non-GAAP reconciliation Condensed Consolidated Balance Sheets As of March 31, 2023, Waterdrop reported total assets of RMB 5,810.8 million, total liabilities of RMB 1,164.9 million, and total shareholders' equity of RMB 4,645.9 million, indicating strong liquidity Balance Sheet Summary (as of March 31, 2023) | Item | Amount (RMB thousands) | | :--- | :--- | | Total Assets | 5,810,848 | | Total Liabilities | 1,164,932 | | Total Shareholders' Equity | 4,645,916 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2023, the company generated net operating revenue of RMB 606.2 million, resulting in an operating profit of RMB 10.3 million and a net profit attributable to Waterdrop Inc. of RMB 49.7 million Statement of Operations Summary (for Q1 2023) | Item | Amount (RMB thousands) | | :--- | :--- | | Net Operating Revenue | 606,165 | | Total Operating Costs and Expenses | (595,837) | | Operating Profit | 10,328 | | Net Profit Attributable to Waterdrop Inc. | 49,725 | Reconciliation of GAAP and Non-GAAP Results The company provides a reconciliation of its GAAP net profit to its non-GAAP adjusted net profit, showing an adjusted net profit of RMB 96.4 million for Q1 2023 after accounting for share-based compensation and foreign currency exchange gains Q1 2023 GAAP to Non-GAAP Reconciliation | Item | Amount (RMB thousands) | | :--- | :--- | | Net Profit (GAAP) | 49,725 | | Add: Share-based compensation expense | 46,926 | | Add: Foreign currency exchange gain | (282) | | Adjusted Net Profit (Non-GAAP) | 96,369 |