On Wednesday, Yuanbao (NASDAQ:YB) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Yuanbao Inc. reported a robust first quarter 2026 with total revenues of 1.32 billion RMB, up 35.6% year-over-year, and net income of 388 million RMB, reflecting a 31.4% increase.

The company is focused on leveraging AI and big data to enhance its operational processes, including a model matrix of over 5,000 models for service optimization and an AI-powered service system for insurance consultation.

Yuanbao Inc. declared an annual cash dividend of USD 1.26 per ADS and announced a USD 15 million share repurchase program, reflecting strong financial health and commitment to shareholder returns.

Management highlighted a strategic focus on integrating AI capabilities across operations to improve user experience and operational efficiency, particularly in insurance decision-making and claims processing.

The company sees opportunities in the evolving health insurance market in China, driven by increased consumer awareness and demand for advanced medical treatments and ecosystem integration.

Yuanbao Inc. maintains a solid cash position of 4.74 billion RMB, supporting ongoing investment in technology and strategic initiatives.

The company expects the industry's transition to high-quality development to align with its strategies, driven by technology and user-centric approaches.

Full Transcript

Operator

Ladies and gentlemen, good day and welcome to Yuanbao Inc's first quarter 2026 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Stella Liu, investor Relations and Strategy Associate Director. Please go ahead.

Stella Liu (Investor Relations and Strategy Associate Director)

Thank you, Operator. Please note that today's discussion will contain forward looking statements made under the safe harbor provisions of the U.S. private Securities Litigation Reform act of 1995. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and discussion.

A general discussion of the risk factors that could affect Yuanbao's business and financial results is included in certain filings of the company with the Securities and Exchange Commission. The company does not undertake any obligation to update this forward looking information except as required by law. During today's call, management will also discuss certain non Generally Accepted Accounting Principles (GAAP) financial measures. For a definition of non Generally Accepted Accounting Principles (GAAP) financial measures and a reconciliation of Generally Accepted Accounting Principles (GAAP) to non Generally Accepted Accounting Principles (GAAP) financial results, please see the earnings release issued earlier today. Joining us today on the call from Yuanbao's Senior Management are Mr. Rui Fang, our Chairman and Chief Executive Officer, and Mr. Rui Wan, our Chief Financial Officer. Mr. Fang will deliver his remarks in Chinese, followed by an English translation. We will conclude the call with a Q and A session. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on Yuanbo's investor relations website.

I will now turn the call over to our chairman and CEO, Mr. Fang. Please go ahead, sir.

Rui Fang (Chairman and Chief Executive Officer)

Hello everyone. Thank you for joining us today for our first quarter 2026 earnings conference call. Please note that all figures will be in RMB unless otherwise noted. In the first quarter of 2026, we extended the solid growth trajectory we established last year while maintaining a healthy balance between business expansion and profitability quality. We generated total first quarter revenues of 1.32 billion RMB, representing a year over year increase of 35.6%.

Net income reached 388 million, up 31.4% year over year, with net income margin at 29.5%. This performance underscores our comprehensive strength in collaborating with insurers to drive product innovation, personalized recommendations, refined operations, claim service, and advanced AI integration. As of the end of the first quarter, our cash reserves totaled 4.74 billion, providing a strong financial foundation for continued investment in technology, deeper application of AI and big data and capturing structural opportunities within the industry.

Meanwhile, we continue to strengthen our data and modeling capabilities. As of quarter end, our model matrix comprised more than 5,000 models capable of analyzing over 5,800 labels, playing a critical role in end to end service optimization across demand identification, product recommendations and claims service. In addition, supported by our robust cash position and sustained robust operating cash flow, we are pleased to announce that our Board of Directors has approved an annual cash dividend of US dollar 1.26 per ADS, together with a US$15 million share repurchase program.

We believe this action underscores the strength of our financial foundation and reflect our ongoing commitment to enhancing shareholder returns as we steadily grow the long term value of our company. The insurance industry is entering a new phase of high quality development characterized by structural optimization, value driven efficiency enhancement and ecosystem integration. At the same time, the demand side is undergoing a fundamental shift. Consumers awareness of risk protection continues to strengthen and insurance purchasing behavior is becoming increasingly proactive. Meanwhile, the accelerated development of China's multi tier health care protection system is expanding the role of commercial health insurance across healthcare services, innovative drug payment solutions and family risk management.

The overall industry environment continues to improve, expanding the industry's long term growth potential and creating more favorable external conditions for the commercial health insurance market on which Yuanbao is focused. The supply side of the industry is also keeping pace with market dynamics, accelerating iteration and upgrades to better meet evolving consumer demand. For example, in the health insurance sector, the nationwide rollout of DRG dip payment system has significantly increased demand for coverage related to innovative medical treatments and drugs, driving continued expansion and upgrading of medical insurance products, coverage and broader protection for advanced medical treatment. In addition, the Insurance plus services ecosystem model is becoming an increasingly mainstream industry trend. Insurance products are now being more deeply integrated with wider ecosystem such as health management, rehabilitation and convalescent services. As a result, industry competition is evolving from pure product supply capabilities to a broader context of ecosystem integration. Against this backdrop, we have consistently placed products and services at the center of our long term development strategy.

On the product side, we continue to work closely with insurance carriers to enhance and iterate our inclusive insurance offerings with a focus on addressing the needs of specialized customer segments including individuals with pre existing conditions and new urban residents. We acted swiftly to fully integrate the commercial insurance innovative drug catalog into our product offerings, keeping pace with emerging policy trends and broadening public access to advanced therapies and high quality medications.

On the service side, we have integrated our technological capabilities throughout the claims process. With the launch of our Intelligent Claims Assistance feature, which assists partnered insurers in conducting preliminary reviews of low value low risk claims. Our proprietary claims review system automatically verifies claims documents and calculates claims amounts, improving insurers claims processing efficiency, enhancing the overall user claims experience and significantly shortening response times for small value plan.

Amid this industry evolution, the role of Internet insurance has undergone a fundamental transformation. It is no longer merely an online extension of traditional insurance distribution channels. Instead it has evolved into industry infrastructure by leveraging data and technology to connect user demands, insurance product supply and service capabilities. It has become a pivotal force driving business model upgrades and reshaping industry efficiency.

This shift is particularly evident in the health insurance and inclusive protection segments where product offerings have grown increasingly diverse. While policy terms, coverage benefits, underwriting rules and claims processes have become more specialized and comprehensive. Consumers increasingly prefer to obtain information and compare solutions online, leveraging AI powered tools to better understand and select insurance products. As a result, the industry's competitive focus is gradually shifting away from pure traffic acquisition and product sales toward the comprehensive development of AI capabilities, professional service expertise and long term user trust. Against this backdrop, Yuanbao has prioritized the development of integrated AI capabilities as a core strategic initiative for organizational upgrading. Our AI insurance large language model has now been deployed at scale and is deeply integrated into our core business operations, delivering meaningful improvements in both operational efficiency and user experience. In terms of AI applications, we have developed an AI powered service system based on multi agent collaboration and launched an intelligent insurance consultation and planning tool for consumers.

The system focuses on key stages of the insurance decision making process, offering functions such as interpretation of product coverage and benefits, underwriting, eligibility assessment for users with pre existing medical conditions, insurance planning suggestions and policy explanation and comparison. Through multi tier conversations, the system continuously refines user profiles to deliver personalized insurance consultation and planning services.

From a tech standpoint, we have built a structured knowledge system centered on an insurance expertise knowledge base and domain specific modeling capabilities covering product clauses, underwriting rules and service workflows. The knowledge base currently encompasses thousands of insurance products and their policies policy details with millions of accumulated professional knowledge, data, insurance planning, insurance, healthcare and service processing.

Through model training and optimization tailored to insurance scenarios, the system consistently enhances its own understanding of complex semantics, health condition descriptions and policy rules. Architecturally, a multi agent collaborative mechanism enables modular execution of tasks such as requirement comprehension, information completion, knowledge retrieval and solution generation, improving response quality and stability across complex computation scenarios.

In terms of business outcomes, these capabilities have measurably enhanced users understanding of insurance products improved their decision making efficiency and strengthened the professionalism and trustworthiness of the consultation process. At the same time, by productizing professional knowledge and service capabilities, we continue to improve the level of standardization, professionalism and intelligence in consumer facing insurance consultation services.

We have adopted integrated AI capability development as our core strategic organizational upgrade strategy, driving the large scale deployment and deep integration of AI agents across all functions and processes and accelerating the paradigm shift from tool based AI to organization wide AI. Our three tier architecture of platform plus skills plus scenarios enables rapid composition and reliable operation of AI agents across complex business scenarios.

Before I conclude, I want to touch on industry influence and thought leadership. In May this year, Yuanbao, together with the China center for Insurance and Pension Finance Research at Tsinghua University BBC School of Finance, released the 2025 China Internet Insurance Consumer Insights Report for the fifth consecutive year. The report continues to track evolving consumer behavior and changing demand trends in China's Internet insurance market. It serves as a valuable reference point for the industry while allowing us to develop deeper insights into the ongoing shifts toward digitalization, intelligent services and increasingly rational consumer decision making. We incorporated those insights into our product matching capabilities, AI powered services and operational system development, reinforcing Yuanbao's leading position in the Internet insurance industry.

Looking Ahead against this backdrop of the launch of the 15th Five Year Plan and the ongoing implementation of the Healthy China Strategy, public awareness of health protection is rising and the demand for more professional, personalized and full lifecycle insurance services is growing with it. The industry's accelerating transition from skill driven expansion to high quality development aligns closely with Yuanbao's long standing strategic focus on technology driven development, user centricity and commitment to inclusive protection. Going forward, we remain focused on building integrated AI capabilities, deepening AI agent deployment across the full insurance process.

We will continue to enhance our ability to identify user needs, match users with suitable products and deliver advisory services, thereby upgrading both operational efficiency and user experience. These efforts will lay a solid foundation for establishing a full lifecycle health and protection ecosystem. Supported by our solid financial foundations, sustained profitability, extensive data assets and large model capabilities, as well as long term insights into users real needs. We are confident we can capture the industry's structural opportunities.

We will continue to provide users with more professional, convenient and trustworthy insurance services, generating long term sustainable value for consumers, partners and shareholders while helping to strengthen China's multi tiered medical protection system and safeguarding public well being. Now I'll turn the call over to our CFO Ri Wan to present our financial results for the first quarter of 2026. Thank you everyone.

Rui Wan (Chief Financial Officer)

Thank you Mr. Fangg. And thank you everyone for joining today's earnings conference call. I'm pleased to walk you through our first quarter 2026 financial results. We started the year with a strong all round performance marked by healthy double digit top line growth, solid profitability and a strengthened cash position. We also continue to make meaningful progress on integrating AI more deeply across our organization. Total revenues for the first quarter came in at 1.3 billion, a 35.6% year over year increase.

This growth was broad based with meaningful contributions from both insurance distribution system services. Looking at our revenue mix, insurance distribution services contributed 411.3 million, a 27.8% year over year increase. This reflected a higher volume of policies purchased through our platform, supported in part by our targeted marketing initiatives system. Service revenues totaled 904.6 million, up 39.8% year over year. Growth year was led by continued refinements to our full consumer service cycle engine which enabled us to deliver more effective marketing and customer related service services to our partnered insurance carriers.

Deepen engagement with both existing partners and newly onboarded carriers also contributed to the increase. Turning to expenses, Total operating expense costs for the quarter rose 29.1% year over year to 878.6 million. Operations support expenses came in at 47.5 million, up a modest 6% year over year. Selling and marketing expenses increased 29.4% year over year to 638.2 million, reflecting our continued investment in consumer acquisition engagement.

General admin expenses were 86.6 million, up 30% year over year, primarily driven by higher salaries. Research and development expenses rose 39.7% year over year to 106.3 million as we continue to grow our R and D headcount and broaden our technical capabilities which remain core to differentiating our online insurance distribution platform. Before the operating line, Income tax expense for the quarter was 69.4 million compared with 6.7 million a year ago, primarily driven by a higher effective tax rate during the quarter.

Net income for the quarter was 387.6 million, a 31.4% year over year increase with a net income margin of 29.5%. Non GAAP adjusted net income reached $408.8 million, up 31% year over year with a non GAAP adjusted net income margin of 31.1%. Our cash position grew during the quarter. As of March 31, 2026. Our cash and cash equivalents, Time deposits, restricted cash, short term investments and long term bank deposits total 4.74 billion, an increase of 71.4% year over year and 17.4% from year end 2025.

Net cash provided by operating activities in the quarter was 721.3 million, reflecting the underlying cash generation power of our business. This balance sheet strength provides us with ample flexibility to continue investing in our strategic priorities, including the build out of our integrated AI capabilities. Capabilities. Our financial performance enables us to invest in growth while also delivering on our commitment to long term shareholder value.

Let me now turn to how we are returning value to our shareholders. First, regarding the dividend. The Board has approved an annual cash dividend of US dollars 1.26 per ADS or US dollars 0.21 per ordinary share. The record date is set for a close of business on July 2, 2020 26. We expect to pay ordinary shareholders on or around July 21, 2026 and ADS holders on or around July 28, 2026. Please note that precise timing of receipts may vary based on the processing efficiency of the respective brokerages.

Future dividends remain subject to the approval of our Board of Directors. Second, regarding the share repurchase program, the Board has authorized us to repurchase up to 15 million of our ordinary shares in the form of ADS over a 12 month period. As Mr. Fang mentioned, this reflects our Board's confidence in our long term growth prospects. We plan to fund these repurchases entirely from our existing cash balance. The Board will review this program periodically and may adjust, suspend or discontinue it based on market conditions to close.

Our first quarter results reinforce both the durability of our growth model and our ability to expand while maintaining financial discipline and strong profitability. This financial strength also supports both a cash dividend and a share repurchase program, underscoring our commitment to capital discipline and direct shareholder returns. Looking ahead, we will remain focused on driving high quality revenue growth, unlocking further operating leverage and delivering lasting value for our shareholders.

Thank you. And I would now like to open the call to Q and A operator. Please go ahead.

Operator

Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again for the benefit of all participants on today's call. If you wish to ask your question to management in Chinese, please immediately repeat your question in English. We will now proceed to take our first question and Our first question comes from the line of Amy Chen of Citi. Please ask your question. Amy, your line is open.

Amy Chen (Equity Analyst at Citi Research)

Hi, this is Amy from Citi Research and I would first like to congratulate the management on a quarter of very robust results. So my question is on marketing efficiency. The year to date in 2026 have you seen continuous improvement in marketing efficiency? And we'd like to learn more about how AI deployment has enabled this and in particular in which phase, say customer acquisition or conversion or post sales services

Rui Wan (Chief Financial Officer)

where AI helped the most. Our customer acquisition efficiency has remained robust as our business scale has expanded as reflected in our sustained operating leverage in selling and marketing expenses and our customer acquisition usually based on core engine with no major changes. While rising acquisition costs typically accomplish business growth in this industry, our tech driven engine and continuous improvements help offset this trend. Over the past past quarters, we have successfully controlled cost growth and a stabilized margin amid intense competition.

So from an AI perspective, our model has consistently been AI driven with no major changes.

Operator

Thank you. We will now take our next question from the line of Yue Xu From China Security Co. Please ask your question. Yue, your line is open.

Yue Xu (Equity Analyst at China Security Co.)

Okay, so congratulations on another strong quarter and my question regards. On the marketing policy, we see some new rules from April 2026 banning using personal accounts to market financ financial products including insurance products. So just wondering how much will this impact our customer acquisition model?

Rui Wan (Chief Financial Officer)

To date, the release of this regulation has hasn't had any material impact on our user acquisition model. First, prioritizing compliance. We have long established marketing management systems and mandatory compliance reviews. Furthermore, our core business model is built on deep collaboration with licensed issuers. All of our product terms are either filled with or approved by the regulators, ensuring ongoing compliance across our operations. We are also committed to maintaining long term proactive communication with regulatory authorities to ensure our corporate strategy remains aligned with the latest policy direction.

Operator

Thank you. We will now proceed to take our next question and the question comes from Thomas Wang of Goldman Sachs. Please go ahead Thomas, your line is open.

Thomas Wang (Equity Analyst at Goldman Sachs)

From. My question is on shareholder return so it's good to see that we got positive return, profit and the dividend and the buyback. Can you just give us a little bit of color on your thinking and how you think about shareholder return in the future? Thank you. Dajang.

Rui Wan (Chief Financial Officer)

As Disclosed in today's first quarter results, our board has approved two core of an annual cash dividend of 1.26 US dollar per ADS and a share repurchase program of up to 15 million US dollars which is aligned with what we communicated with the market before. This action is fully demonstrated on our long term confidence in our business outlook and our firm commitment to enhancing long term corporate value. As our chairman Mr. Fong emphasized, this reflects both our healthy financial fundamentals and a key component of our capital allocation strategy.

Through shareholder return strategies, we aim to steadily create sustainable value for our shareholders while securing the complete future growth. And for 2026, we will review our shareholder return policies again.

Operator

Thank you. We will now take our next question from Tsing Tao Chen of cicc. Please go ahead. Sing Tao, your line is open.

Chen Xintao (Equity Analyst at CIC)

Hi Management, this is Chen Xintao, Prong Sustainability. Thank you very much for the opportunity to ask a question and congratulations on the excellent result in the first quarter. So we noticed that the company recently co published the 2025 China Online Insurance Customer Insights Report with Tsinghua University which highlights the acceleration of online insurance distribution and point to AI as a key driver in consumers purchase decisions. So could management add some color on whether the companies plan more strategies or scenarios around AI, empower consumer decision making to enhance consumer outreach and drive higher conversion? Thank you. Java. Guihao diving toba.

Rui Wan (Chief Financial Officer)

Yes, absolutely. For example, this quarter we developed an AI powered service system based on multi agent cloud collaboration and launched an intelligent insurance consultation and planning application for consumers. This system has been deeply embedded across all decision making stages, providing full process support such as policy interpretation, pre existing condition assessment and personalized plan comparison. Through multi turn conversations that progressively enrich user profiles, we have addressed the pain point of complex policy terms, significantly lowered the barriers to user decision making and enhanced both professionalism and trust.

On the technical side, our core is a structured knowledge system spanning thousands of products and millions of data points, coupled with a domain specific model optimized for insurance scenarios to precisely understand complex health conditions and underwriting rules. By modularizing user intent comprehension, knowledge retrieval and plan generation through multi agent collaboration, we ensure high service quality and consistency. This system has successfully, fully standardized and prioritized our service capabilities.

Moving forward, we will continue to leverage our proprietary tech to deepen AI application in precision reach and decision support, consolidating our leadership in intelligent insurance services.

Operator

Thank you. We will now take our next question from Yuan Liaof citic. Please go ahead. Yuan, your line is open.

Yuan Lia

Thanks Management for taking my questions. Congrats for the strong quarter results. And my question is about the AI Asian influence on our business model and the competition landscape. So how should we think about the impact of the Asian era on our business model and competition? Thank you.

Rui Wan (Chief Financial Officer)

Whether new entry points like AI agents can become mainstream channels for insurance sales. We believe the viability of this scenario remains to be seen. There are two methods of serving today. One is online through infinite systems and the other is through traditional human agents. The key is to understand how AI will reshape the sales dynamics of content consumption platforms and whether it will transform SEO or GEO discovery methods. We believe that major Internet platforms where we currently distribute our products will continue to command a significant share of user time spent in the foreseeable future.

That said, we do believe that products requiring more users might share decision making such as higher premium products which are typically sold through search or E commerce discovery channels, will potentially be affected by the advent of AI capabilities. More importantly, the widespread use of AI for information discovery and search will better educate consumers about insurance products. This in turn will help rise awareness, build trust and drive the overall adoption of commercial insurance.

Ying Ying Xu

Thank you. We will now proceed to take our next question from the line of Ying Ying Xu from Zhishang Securities. Please go ahead. Yingying, your line is open. Thank you for taking my question and congratulations on the results. My question is about customer retention and renewal rates. Aside from continual traffic acquisition, could management share what customer engagement and retention initiatives Yuanbao is currently focusing on to better balance conversion efficiency and user experience and further improve policy renewal rates? Thank you.

Rui Wan (Chief Financial Officer)

Customer acquisition through online channels remains very important to us because we believe that China's commercial health insurance market remains significantly underpenetrated. We continue to invest in new products and services for our consumers to improve user experience in terms of product innovation. We collaborated with insurers to deeply customize high perceived value products such as zero deductible medical insurance and multi claim critical illness plans, building user stickiness from the start.

Additionally, we are continuously rolling out value added services, particularly the deep integration of our technology capabilities throughout the entire claims process. By leveraging AI, we have enabled our partner insurers to achieve significantly more efficient and faster reaction times when handling user claims. This not only provides us with tangible positive user experience stories to share with the market, but more importantly, it fundamentally strengthens user trust which is the cornerstone for improving long term policy renewal rates.

We believe that our efforts to continually collaborate with insurers to innovate and increase the awareness of the value of short term commercial insurance policies will lead to improve the metrics.

Ji Qi sun

Thank you. We will now take our next question from the line of Ji Qi sun of Shenwan Hongyuan Securities. Please ask your question Jiqi, your line is open. This is Jackie San from securities. Congratulations on the impressive result of the first quarter of 2026. As previously mentioned, on top of Yuanbo's core business, the company is planning to explore some innovative initiatives. Could you please share more details on the specific areas and strategic direction of this exploration and when should we expect to see meaningful progress or tangible results from this effort? Thank you.

Rui Wan (Chief Financial Officer)

We are always exploring and evaluating innovative and new business while remaining anchored in our core business. However, our current explorations are not yet at a stage to disclose. Therefore, we have no specific details to disclose at this time.

Operator

Thank you. That concludes the question and answer session. I'd like to turn the conference back to the management for any additional or closing comments. Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or presentate Financial Communications. Our contact information for IR in both China and the US can be found in today's press release. Have a great day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.