Waterdrop (WDH) Q2 2026 Earnings Call Transcript

DATE

Tuesday, Sept. 8, 2026, at 8 a.m. ET

CALL PARTICIPANTS

• Founder, Chairman, and Chief Executive Officer – Sheng Peng
• Director and General Manager of Insurance Business – Wei Ran
• Finance Vice President, Head of Strategy and Capital Markets – Jieru Li
• Investor Relations – Tracy Lee

TAKEAWAYS

• Total Revenue — RMB1,448.2 million, representing 72.8% year-over-year growth driven by insurance segment expansion and higher technical service income.
• Insurance-Related Income — RMB1,333.2 million, increasing 80.5% year over year due to enhanced risk assessment service capabilities and higher first-year premiums.
• Net Profit — RMB125.8 million, a 10.3% decrease year over year reflecting higher tax expenses and nonrecurring items.
• Operating Profit — RMB111.3 million, up 14.3% year over year as core business leverage improved.
• Technical Service Income — RMB488.0 million, compared with RMB160.9 million for the same quarter last year, reflecting algorithm-driven verification expansion.
• Sales and Marketing Expenses — RMB637.5 million, growing 220.7% year over year due to active investment in public domain traffic channels.
• Research and Development Expenses — RMB68.8 million, increasing 32.4% year over year due to higher cloud server and token fees for AI support.
• General and Administrative Expenses — RMB93.4 million, up 27.2% year over year primarily due to an increase in allowance for credit losses.
• Cash Dividend — $0.03 per ADS, with an aggregate payment of approximately $10.8 million scheduled for Nov. 2026.
• Share Repurchase Program — $50 million authorized for the next 12 months, following $121.3 million in cumulative repurchases since Sept. 2021.
• New Customer Acquisition — Rising 32.3% quarter over quarter reflecting refined AI-driven user conversion models.
• Long-Term Insurance Premium — Growing 33.4% sequentially driven by market demand for endowment products.
• Digital Clinical Trial Revenue — RMB35.2 million, up 26.8% year over year following enrollment growth in chronic disease projects.
• Medical Crowdfunding Revenue — RMB63.6 million, decreasing 5.7% year over year as service fee income declined.
• Patient Enrollment — 1,540 patients during the quarter, representing 54% year-over-year growth in digital clinical trial solutions.
• Cash Position — RMB2,652.7 million as of June 30, 2026, providing liquidity for business investment and dividends.
• AI-Generated Premium — Approximately RMB100 million in first-year premiums during the quarter through AI-driven user interactions.
• Chronic Disease Enrollment — Increasing 80% year over year, reflecting the company’s ability to navigate high screening failure rates in specialized studies.
• Insurance Operating Profit — RMB183.6 million, a 20% sequential increase reflecting improved operational efficiency.
• FY2026 Guidance — Target of more than 40% revenue growth and over 10% operating profit growth year over year.
• Medical Crowdfunding Scale — RMB74.7 billion in cumulative funds raised for 3.82 million patients through the end of June 2026.
• Preexisting Condition Premiums — RMB310 million in first-year premiums from products targeting users with preexisting health conditions.
• Term Loan Facility — $40.0 million secured facility entered after the quarter end, bearing 10% interest per annum.
• Allowance for Credit Losses — RMB33.3 million increase during the quarter, contributing to higher general and administrative expenses.
• Marketing Channel Investment — RMB415.0 million increase in spending on third-party traffic channels compared to the same period last year.

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RISKS

• Shen noted that media coverage regarding the enforcement of tax rules has had an effect on customer sentiment for Hong Kong insurance products.

SUMMARY

Management reported that growth during the quarter was supported by the integration of artificial intelligence across core business scenarios and a focus on expanding insurance coverage for users with preexisting conditions. Waterdrop Inc. (WDH +4.90%) stated that its insurance segment continues to benefit from rising health protection awareness and a structural shift in household savings toward long-term assets. The company noted that it is maintaining a disciplined approach to capital allocation through a new share repurchase program and a cash dividend while pursuing growth in digital clinical trial solutions and medical crowdfunding. Management indicated that current investments in user acquisition and technology are expected to drive sustainable profitability and efficiency gains across the platform’s service lifecycle.

• CEO Shen reported that the company is piloting a portable AI office assistant smart hardware product in global markets to leverage in-house research and development capabilities.
• Management indicated that insurance products for individuals with preexisting conditions contributed RMB310 million in first-year premiums during the second quarter.
• Regarding tax enforcement sentiment, Shen stated that current market activity reflects the enforcement of established tax rules that have been in place for some time.
• Founder Shen stated, “Expanding access to insurance protection remains our core product strategy.”
• The company reported that its digital clinical trial platform, E-Find, has partnered with 255 pharmaceutical companies and contract research organizations as of June 30, 2026.
• The company has filed 80 AI-native large language model patents, including 10 overseas, to support core business integration.
• Director Ran noted that while chronic disease studies have larger patient pools, they typically carry higher screening failure rates and require greater matching speed.

INDUSTRY GLOSSARY

• ADS: American Depositary Share, which allows investors to trade shares of foreign companies on U.S. exchanges.
• FYP: First-year premium, representing total premium collected from new insurance policies during their first year of coverage.
• CRO: Contract Research Organization, an entity that provides outsourced research services to pharmaceutical and biotechnology companies.
• LLM: Large Language Model, a type of artificial intelligence trained to understand and generate human-like text.
• CRM: Customer Relationship Management, technology used for managing all of a company’s relationships and interactions with customers.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen. And thank you for standing by for Waterdrop Inc. Second Quarter 26 Financial Results Earnings Conference Call. At this time, all participants are in a listen only mode. After the management’s prepared remarks, there will be a question and answer session. As a reminder, today’s conference call is being recorded. I would now like to turn the meeting over to Ms. Tracy Lee. Please proceed, Ms. Lee.

Tracy Lee: Thank you, operator. The ambassador and analyst, this is Tracy Lee from Boyshop Investor Relations. Please note that discussion today will contain forward looking statements made under the Safe Harbor provision of U.S. Private Securities and Litigation Reform Act of 2000. Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risk and uncertainties include, but not limited to, those outlined in our public filings with the SEC. The company does not undertake any obligation to update any forward looking statement. Except as required by applicable law. Also, this call include discussion of certain non GAAP matters.

Please refer to our earnings release for reconciliation between non GAAP and GAAP. Joining us today on the call are Mr. Sheng Peng, our founder, chairman, and CEO, Mr. Wei Ran, director and GM of insurance business, Ms. Jieru Li, finance VP, head of strategy and capital markets, Certain members of our management team will deliver their remarks in Mandarin. Followed by an English translation. Moreover, a webcast reply will be available on our Investor Relations website. I will now turn the call over to our CEO, Sheng Peng. Please go ahead.

Peng Shen: Dear investors and analysts, thank you for joining What Is Your Second Quarter 26 Earnings Conference Call. In this quarter, we maintained growth momentum and achieved a total revenue of 1.45 billion yen, up 72.8% year over year. And the net profit attributable to our ordinary shareholders of 130 million since the first quarter of 22, we have maintained profitability for 10 consecutive quarters. Segment wise, our insurance business continued to optimize user acquisition and conversion, driving 80.5% year over year revenue growth. What is your medical crowdfunding has cumulatively raised medical funds for 3.82 million patients. As of the reporting end. Our digital claims and trial solution business performed strongly with quarterly patient enrollment over 50% year over year.

This growth trend was underpinned by deep integration of AI, across our core business scenarios. And at the end of June, the company has filed 80 AI-native large language model patents, including 10 of them overseas. With strong performance and cash reserve, continue to prioritize shareholder returns Our board recently approved the 2 new initiatives. Firstly, the board has approved a cash dividend of $0.03 per ADS. Or $0.003 per ordinary share Payable to holders of the record on October 9, 2026. The aggregate dividend payment is approximately $10.8 million. With payments to be made in early November. Second, the board approved the fixed share repurchase program of up to $50 million over the next 12 months.

Is the initial program launched in 2021, we have repurchased approximately 62.9 million ADS for $121 million as of August 31, 2026. The company remains committed to sustainable development and to giving back to society in meaningful ways. As of June 30, 26, what is your charitable– the charity platform has partnered with 119 public charitable organizations and launched more than 15.6 thousand charity programs. What is your program’s focus on growth and investment in core businesses? We expect that our current incremental investment income to continue translating to a solid user base in the future productive potential. We always regard technology as the core driver of big companies’ growth. Today, our AI capabilities are evenly bended across the platform.

Enabling us to better capture growth opportunities in our existing businesses. And further sharpen our competitive edge. At the same time, we are actively piloting new AI driven initiatives. For global markets and have made early progress into that market. For full year of 2026, Waterdrop targets more than 40% year over year growth in total revenue and over 10% of growth in operating profit. This conclude our overview of Waterdrop’s business performance Now we will walk you through each of our business segments in more detail.

Wei Ran: Hello, everyone. This is. Let me brief you on our insurance business. The second quarter, insurance related income reached 1.33 billion yen, up 80.5% year over year and 15.4% for the quarter. Operating profit was 180 million, up 20% for the from the previous quarter. With continued refinement in our AI driven user insight and conversion capabilities, newly acquired customers rose 32.3% sequentially. The first year premiums of long-term insurance grew 33.4% sequentially. As we capture market demand for endowment insurance this quarter. On the product side, our core strategy remains improving the ability of the insurance products.

This quarter, we delivered several new products in line with this direction, including the launch of Gongyibao, Market first long term critical illness insurance product, recording no health disclosure and offering 5-year guarantee of renewability. We are also expanding our Tiejiaobang matrix. Which now includes the max market for specified disease insurance offering lifetime coverage with no health disclosure. During this quarter, products with users with preexisting conditions contribute 310 million renminbi FIP, and disability insurance added 84 million. that is for today. On the service side, we have adopted differentiated scenario based operations across customer touch points. And this quarter, AI applications across our user facing interactions helped generate nearly 100 million in 5 p.

Among them, AI for insurance generates FYP in millions each month. FYP facilitated by our AI medical insurance experts rose by 25.6% sequentially. In the WeChat scenario, we AI executed our strategies directly from the demand identification and user profiling to key moment engagement and batch outreach. Contributing over 10 million in FYP during this quarter. Long term insurance sales, the value of AI ultimately comes down to expanding what our life planners can do. As for our underwriting assistant, Kuiyi.ai, had answered more than 130 thousand underwriting question. since its launch. Our AI super sales representatives have constantly outperformed human life planners on annual premium policies. And the number of users served grew grow nearly 50% sequentially.

Powered by multi agent collaboration, our AI conversion model captures user preference from natural language interaction turning them into durable profile we can draw on over time. And proactively surface topics tailored to each user, extending the reach of every life planner we have. That concludes our update on the insurance business. for the second quarter. Next, let me briefly update on Waterdrop’s medical and healthcare businesses. As of the end of June 26, Waterdrop’s medical crowdfunding had cumulative contributions from around 499 million? Of donors, up to 3.82 million patients and raised a total of 74.7 billion yen. This quarter, we continue to upgrade our AI driven risk control model, further improving asset concealment detection and sensitive identity detection.

By combining semantic analysis of ID information, medical and user generated content, the operating engine can better identify hidden inconsistency and improve risk control efficiency. Okay, in our healthcare businesses, our performance exceeding expectations across several key metrics. We enrolled more than 1.5 thousand patients in this quarter, 54% year over year. And cumulative patients served surpassing 17 thousand. Growth was driven mainly by the higher matching efficiency and stronger enrollment capability. Oncology projects remain our core focus. While chronic disease projects are growing most of its sequential growth data. Although chronic disease studies have a larger patient pool, they typically carry a high screening failure rate and in place greater demands on matching profession and speed.

Chronic disease enrollment increased 80% year over year in the second quarter. Further validating our enrollment ability in high screening failures enrolled. Meanwhile, our proven enrollment track record is translating into deeper and broader trust among paid partners. And this quarter, E-Find platform signed 167 new products and a number of pharmaceutical companies and CROs we partnered with surpassed 255. Going forward, we are going to continue to optimize the operational efficiency and work with our partners to advance digitalization across the clinical trial process. This concludes our update on profiling and healthcare Hello, everyone.

Jieru Li: This is Jieru Li. Next, I will walk you through our financial highlights for the second quarter of 26. Before I go into details, please be reminded that all the numbers quoted here will be in RMB Please refer to our earnings release for detailed information on our financial performance on both the year over year and quarter over quarter basis, respectively. In the second quarter of 26, Waterdrop delivered net operating revenue of 1.448 billion. Up 72.8% year over year, maintaining a strong growth momentum. Our insurance business contributed about 1.333 billion yen in revenue, representing an 80.5% increase year over year.

Non insurance businesses accounted for around 7.9% of total revenue, including 63.6 million yuan from medical crowdfunding service fees and 35.2 million yuan from our digital clinical trial solution. Total operating costs and expenses came in at about 1.337 billion yuan in the second quarter. Up 80.5% year over year. Operating costs were 537 million, increasing 29% year over year. The increase was primarily driven by business scale expansion including an increase of around 63.8 million yuan in cost of referrals and service fees. As well as an increase of 21.4 million yuan in short message service costs. And 11.2 million yuan in personnel cost, respectively.

Sales and marketing expenses reached nearly 638 million compared with 199 million in the same quarter of 2020. 5. The year-over-year increase mainly reflected our active step up in public domain traffic investment. With marketing expenses for third party traffic channels increasing by about 450 million and marketing related professional technical service fees increasing by around 21.8 million yen. G and A expenses were 93.4 million, up 27.2% year over year mainly due to an increase of 33.3 million in allowance for credit losses. This was partially offset by decreases of nearly 10.5 million in personnel costs and share based compensation expenses. R&D expenses were 68.8 million up 32.4% year over year.

The increase was mainly driven by cloud server fees token fees, and other active support expenses. Which rose by about 11.1 million yen as well as an increase of 6.3 million in personnel cost and share based compensation expenses. For this quarter, operating profit reached about 111 million up 14.3% year over year and 39.2% quarter over quarter. However, due to tax related items, nonrecurring gains and losses, net profit attributable to shareholders was around 126 million, down 10.3% year over year, but up 27.9% quarter over quarter.

As of June 30, 2026, cash and cash equivalents, short term investments, and other cash positions totaled about 2.653 billion yen Our cash reserve maintains ample and provides solid support for both business investments and shareholder returns. In terms of shareholder returns, since the launch of our first share repurchase program, we have cumulatively repurchased 62.9 million ADS for across approximately $120 million as of August 31, 2026. And recently, the board approved the fixed share repurchase program and in which we plan to repurchase up to $50 million over the next 12 months. And also approved a cash dividend of approximately $10.8 million. Overall, both the quality and scale of growth in our core businesses improved this quarter.

The continued deployment of AI across every scenario in our business is becoming an important driver of efficiency gains. Meanwhile, we are expanding proactively while investing prudently. In new initiatives and global markets, Which for now have very limited impact on our current year financial results. As these initiatives reach a larger scale, we will keep the capital markets informed in a timely manner. In the future, the company will remain committed to disciplined strategic investment and continue creating long term value for users and shareholders. That concludes the company’s financial results for the second quarter of 26.

Operator: We will now move on to the Q&A session. Okay, thank you, Jieru. Ladies and gentlemen, we will now begin our Q&A session. on your telephone. To withdraw your question, please press 2. In addition, this conference is being webcast live in on the C-Enter platform. If you are joining through the platform, you may also submit your questions in writing there. Okay, We now proceed to take our first question, and it comes from the line of Amy Chen of Citi.

Amy Chen: The question is in terms of the Mainland China business in Hong Kong, media have reported that Mainland tax authorities made tax policy dividends. Has management seen any change ever in international business? Or domestic business?

Peng Shen: You call you think you should have gone through the single GB. So it goes through the C-end. Regarding recent market intention, are we reading that what we are seeing reflects the inform enforcement of tax rules that has long been in place, rather than a new policy specifically targeting Hong Kong insurance. In the midterm, the media coverage have some effect on our customer sentiment. The differentiated value of Hong Kong insurance products like a low currency allocation, access to global health care resources, and a heritage planning, remain clear. Fundamental drivers of the Hong Kong insurance market, has not changed.

Turning to the drivers of Mainland China insurance market today, growth is driven by a rising health protection awareness. Policy tailwinds for commercial health insurance. Continued product innovation, and structural shifts of household savings into long term assets. Such as insurance. In the current low interest rate environment. Waterdrop serves as a diversified customer base across multiple markets and in multiple service models, and our business mix remains solid. We are confident in serving user demand wherever it arises.

Operator: We will now take our next question from Tsingtao Chen of CICC.

Tsingtao Chen: The question is, we have noticed that several insurers have recently launched health insurance products targeting customers with preexisting conditions. How does management evaluate this opportunity in this category, and what is Waterdrop’s product strategy in this area.

Wei Ran: Can be To give a top-down view, that is to answer your latter question. As checkouts become more common, the credit email and living with previous conditions are far more typical. So a clean, standardized is actually quite rare. And traditional health care insurance have long focus on healthy lives, leaving the people with preexisting conditions still go unprotected. Industry consensus to clear or shift shifting our brand and ensuring more healthy people to protecting the health of more people. This is both a real demand side opportunity and a clear path of commercial insurance that extends beyond as coverage.

And early practice was single level inclusive, health plans, that logic is now expanding to more commercial medical insurance, critical illness insurance, disability insurance, and others. This is not simply easing underwriting. It is about segmenting the risk and building differentiated underwriting and claims. So the certain risks can actually be written and paid. For Waterdrop, Broadening coverage is central to our product. Strategy. As of today, we break the demand down by scenario, age, and condition, and codesign terms coverage with our insurer partners On the acquisition side, we use platform and AI in sites to match the right product to the right customer. So people with preexisting conditions can actually find something that works for them.

Longer term, our view is that health cover for people with preexisting conditions can become more, like, auto insurance. People can actually buy it, claim on it, and renew it. Accessibility and the sustainability will have to move together.

Operator: Okay. We will now take our next question from Liu Wu of international.

Liu Wu: The question is, is there a clear timeline for AIA to start generating commercial value? And how will AI investment impact on R&D expenses going forward?

Peng Shen: And what are the new initiatives in the company currently exploring As previously introduced, our AI is expanding across the board value chain, from acquisition to received pre screening and claims, and its roles vary by stage. We are not commercializing AI as a standalone business and its value will show up in our top line growth and bottom line growth we deliver. And as I introduced it earlier, in the user targeting and conversion, our AI directly support user consideration and the purchase decision. Giving nearly 100 million in FYP.

And in our long term insurance and services, tools like Kuiyi.ai and our AI presenter system that help our life planners work more efficiently and close more cases In operations, our AI customer service, and quality inspection application have fully absorbed the actual volume and the scale In our R&D side, the overall R&D ratio is stable, but we, actively shifted resources towards AI. Both in the talent and in token cost. As usage scales, the spend will grow naturally but we are a disciplined about ROI on each scenario. And it will keep the overall ratio to a reasonable range.

And then turning to our new initiative, we are incubating a portable AI office assistant a smart hardware product that will leverage our AI agent know how, in house R&D, and China supply chain strength. It is in pilot sales across major global markets with some encouraging early feedback. That said it is still in the early stage and its financial impact is limited for now, And the experience we are gaining along the way, both for the business for the company overall, is genuinely valuable.

Operator: And we will now take our next question from Kate Liu of UOB Kay Hian.

Kate Liu: Her question is for product and supply perspective, what which insurance category does the management view as having strong growth potential?

Wei Ran: There are 2 forces that we are shaping our health insurance: a rising Health Protection Awareness and an aging population. So the market is shifting from the standardized product to more tailored to actual needs. Demand driven coverage, including, for example, insurance for pre-existing conditions, and high-end medical insurance, and it protects bundled with health management, and the elderly care services The unmet demand that traditional products never really served is being unlocked. We will keep building in this area. And this can create play right into the strength we have built through our online platform. We can reach broadly and target precisely leveraging our AI capability and spot protection gaps in specific customer groups.

Connecting them with the right products and deliver better, faster service at the point of consumer application. So we will keep building on what we are uniquely good at.

Operator: Okay. We will now take our next question from CITIC Securities.

Analyst: The question is, I am noticing the strong growth in Q2, and could you walk us through your recent customer acquisition investment and Qualcomm and what we can expect on the cost side for the rest of 2026 and into 2027.

Peng Shen: The increase in investments They are both in the user acquisition in Q2. That has already show up in the numbers. Like insurance revenue and operating profit both grow further from the last quarter. And the new users were actually up more than 30% sequentially. This is a combined result of better reach out and the conversion and product supply. And in terms of the user acquisition strategy, we are now actually not simply pursuing the cost of What matters most is how we leverage AI capability to better align our product supply with our user profile and improving conversion efficiency.

So currently, AI is has been embedding across the entire process from our customer acquisition to service and it is continually improving our efficiency at our core operations. For the second half of 26 and the full year of 27, our strategic direction remains consistent. We expect to maintain an active user acquisition pace extending our reach to target customer segments and furthering user education coverage And at the same time, we expect the user value generated by the current period acquisition will be gradually realized through renewals and up cells and cross-sells Over the sequential user life cycle.

Operator: We have received no further questions online, and this concludes our Q&A session for today. Thank you to all the investors and analysts who joined us today. Betsy, operator, back to you. We are now approaching the end of the conference call. Thank you for your participation in today’s conference. You may now disconnect. Have a good day.